Cash Flow Lending on GeM Platform- Sahay GeM

About GeM :

GeM is a short form of one stop, ‘Government e-MarketPlace’ where common user goods
and services can be procured ​by various Ministries and agencies of the Government. The
GeM has 3.24 Lakh MSMEs registered on its platform..

It owes its genesis to the recommendations of two Groups of Secretaries, made to the Prime
Minister in January 2016. They recommended setting up of a dedicated e-market for
different goods & services procured or sold by Government/PSUs besides reforming
Directorate General of Supplies and Disposal (​DGS&D​). Subsequently, the Finance Minister
in his Budget speech for FY 2016-17, announced setting up of a technology driven platform
to facilitate procurement of goods and services by various Ministries and agencies of the
Government.

GeM has following advantages for Buyers :

● Rich listing of products for individual categories of Goods/Services

● Search, Compare, Select and Buy facility
● Buying Goods and Services online, as and when required.
● Transparent and ease of buying
● Continuous vendor rating system
● User-friendly dashboard for Buying and monitoring supplies and payments
● Easy Return policy

And GeM has following advantages for Sellers :

● Direct access to all Government departments.

● One stop shop for marketing with minimal efforts.
● One stop shop for bids / reverse auction on products / services
● New Product Suggestion facility available to Sellers
● Dynamic pricing: Price can be changed based on market conditions
● Seller friendly dashboard for selling and monitoring of supplies and payments
● Consistent and uniform purchase procedures

Further information regarding GeM Platform :

● The Hon'ble Finance Minister announced in the ​2020 union budget​ to ​increase the
turnover of GeM​ ​to INR 3 Lakh crore.
 ● Central PSUs are required to procure at last 25 per cent of their total purchases from
MSMEs and ​PSUs have procured 28.26 per cent of total procurement from
MSMEs

● GeM calculates Seller Rating based on coverage, timely delivery , quality of order
fulfillment, and reliability

● GeM mandates OEMs and Seller (except exempted) to establish their credentials
and fast track their sales by getting pre-assessed by Quality Council of India(QCI)

● GeM intervenes for timely generation of Goods Receipt Note (GRN) by the buyers
and there is a proposal to levy interest on delayed payment.

● Once the CRAC number (GRN on GeM) is generated in GeM by Buyer (on or within
10 days post delivery for a invoice & delivery made by Seller),

The Objective : Facilitate cash flow based lending for credit worthy MSMEs,
registered as Sellers on GeM platform

Majority of MSMEs are unable to avail formal, affordable credit for their working capital
requirements. As the government ramps up its demand in wake of ‘Atma Nirbhar Bharat’
initiative, the MSME sellers need to be equipped with capital and GeM provides a great
medium to connect with these prospective MSME borrowers.

The Solution : New Cash Flow Lending Product with GeM as a Loan Service
Provider (Sahay - GeM) :

‘Open Credit APIs’ or ‘Loan Service Provider APIs’ (built out for the first reference
implementation of Sahay app but applicable for many more loan products as generic,
standardised APIs) can facilitate the Cash flow lending for the GeM invoice :

● Interest is to be borne by ​MSME Seller on GeM (GeM as LSP)​. Seller is the

Borrower​ on record.

● Seller to make the re-payment to ​Lender

Process Flow and User Journey for a Seller to avail loan via Sahay-GeM

Step 1 :​ Buyer (​Central PSUs / Ministries)​ place the PO/ Demand on GeM Platform

Step 2 :​ Supplier Bids on the Demand order.

Step 3 :​ Buyer Accept Bid – based on L1, other criteria on GeM. Post Seller’s one time
consent, they will share accepted order and last 90 days’ order history with Sahay - ​1st
Opportunity for Financing for Lender at Order acceptance

Step 4 :​ Supplier makes the goods and services available and generates the Invoice

Step 5 :​ Supplier ships the good / service – (Shipment is carried out)

Step 6 :​ Shipment is Delivered

Step 7 :​ Within 3 days of delivery, the Buyer generates Provisional Receipt Certificate (PRC)
on GeM on actual material received

And the data parameters that will be shared will be following :

Field Name Description

1 Contract Ref PO Number The PO Number Of GEM
2 Contract Date THE PO Date of GEM
3 Buyer GSTN Corporate's GSTN
4 Vendor GSTN Vendor GSTN
5 Vendor PAN Vendor PAN
6 Order Amount Amount as per Order/Contract
7 Order Date Order/ Contract Date as per GEM
8 Order Acceptance Date Order/Contract Acceptance Date - Acceptance by Buyer
 Expected Delivery Start
9 Date Expected Start Delivery Date
Expected Delivery End
10 Date Expected Delivery End Date
Seller Onboarding Date on
11 GEM Onboarding Date on Seller on GEM
Buyer Onboarding Date on
12 GEM Onboarding Date on Buyer on GEM
13 No_Of_order No of Order for Seller (across buyer) in Last 90 days
14 Value_of_order Value of Order for Seller (across buyer) in Last 90 days
Value of Order (across buyer) delivered by Seller in last 90
15 Value_of_order_delivered days
16 Value_of_order_paid Value of Order paid by any buyer to seller in last 90 days

Step 8 :​ Within 10 days of delivery,

A) Buyer generates Consignee’s Receipt and Acceptance Certificate, CRAC
(GRN) for Order and Delivery. CRAC has Buyer’s Digital Signature.
B) In case Buyer fails to generate it, GEM creates CRAC (GRN) for Order and
Delivery. CRAC in this case, is generated without Buyer Digital Signature

Here again, the lender has an option to offer a loan to the seller, post signal of ‘Buyer
acceptance’.

Order Delivery and CRAC generated - 2nd Opportunity for Financing

And the data parameters that will be shared will be following:
Field Name
1 Contract Ref PO Number
2 Contract Date
3 Buyer GSTN
4 Vendor GSTN
5 Vendor PAN
6 Seller invoice No
7 Seller Invoice date
8 Invoice Acceptance Date
9 Invoice Amount
10 Internal Ref No
Description
The PO Number Of GEM
THE PO Date of GEM
Corporate's GSTN
Vendor GSTN
Vendor PAN
Seller invoice No (LIST)
Seller invoice date (LIST)
CRAC Date
invoice amount before any adjustment
The unique identifier of the invoice in GeM for future

11 Adjustment Amount
Seller Onboarding Date on
12 GEM
Buyer Onboarding Date on
13 GEM
14 No_Of_order
15 Value_of_order
16 Value_of_order_delivered
17 Value_of_order_paid
correlation
This is optional field which captures any Adjustments
(CREDIT/ DEBITS)
Seller Onboarding Date on GEM
Buyer Onboarding Date on GEM
No of Order for Seller (across buyer) in Last 90 days
Value of Order for Seller (across buyer) in Last 90 days
Value of Order (across buyer) delivered by Seller in last
90 days
Value of Order paid by any buyer to seller in last 90 days

Step 9 :​ On GEM platform - Sellers who desire to be financed through a lender via
GeM-Sahay app, ​give an explicit consent​ for the same. They can do so by enabling the
option on their​ ‘Seller Dashboard’. ​This can be enabled by them at any point in time, upon
registering on GeM or later.

Please note ​that GeM will push ‘Seller data’ at Step 8 upon PRC and CRAC generation to
Sahay - GeM.

(Reference Call-to-action as placed on bottom right corner above, to be accompanied

with Seller Consent and Bill or Rights)
Here, Seller will be directed to download the Sahay - GeM app and start the process of
availing credit.

From here on, the process here will use the existing ‘Open LSP APIs’ with the ‘LSP
Bridge’ implementation. Some of the key integration points have been highlighted
below:

Step 10 :​ Seller Registers on Sahay - GeM app and links their PAN or GSTN NO

Step 11: ​Sahay - GeM app will display list of eligible invoice available for discounting

Step 12:​ Sahay - GeM will show the eligible invoice (Invoice with CRAC Code generated or
post PRC generation) . Upon borrower’s input, it will request loan offers by sharing these
invoices to multiple lenders simultaneously, in real-time.

Step 13:​ Lender will get ‘Loan Packet’ with eligible invoice along with PRC/CRAC
associated details.

Step 14 : ​Lender will respond with their offer and the same will be shown to the Seller on
Sahay - GeM app

Step 15 - ​Offer acceptance

Having received multiple ​loanOffers​, the MSME will choose a single offer and proceed.
● The selected offer will get attached to the MSME’s ​loanApplication a ​ nd a formal
acceptance will be requested via SMS OTP
● This SMS OTP will be triggered directly by the lender and Sahay - GeM will facilitate
OTP submission by the borrower. Thus, a ​loanApplication b ​ ecomes accepted.

Sahay - GeM app will ​lock the Invoice with lender name (using existing functionality) ​to avoid
double financing of the invoice.

If Seller is NOT an existing customer of the lender, i.e KYC is not done, the lender will initiate
the KYC checks and sequence. (CKYC → OKYC)

Step 16 : ​Sahay - GeM app will direct customer to complete the KYC via Lender Process
(Web)

Step 17 :​ Once KYC , Loan Agreement, Repayment is set by the lender in their GUI, the
Lender will notify the Sahay - GeM that loan is ready to be granted.

Step 18 : ​Grant Loan

Sahay will submit the ​loanApplication ​for a lender’s approval (via ​grantLoan A
​ PI)
At this stage, the lender must make last minute checks (such as verifying the repayment
method is active, borrower’s conditions haven’t materially changed etc.) and create a ​Loan​.

● The Loan thus created should be logged by the lender in PCR.

● Lender shall return a loanId to Sahay - GeM for keeping track of future updates to the
loan object.

Note : In case Lender Bank is unable to respond to the bank in 24 hrs, Invoice will be
un-locked and will be made available for financing.

Step 19 : ​Disbursement

Post receiving the loanId, Sahay - GeM requests the lender to disburse funds to the
borrower.

Lender shall initiate an appropriate IMPS/RTGS/UPI request and deposit funds in the
disbursement account.

Should the disbursal request fail (due to any reason), the lender should inform Sahay - GeM
via a failure request. Lender shall retry the disbursement three times before informing the
borrower about the failure and cancelling the loan.

Step 20 :​ Collections

● Account in operation

Upon successful payment by Buyer to Seller on GeM, GeM will trigger an API to share
following data attributes with Sahay - GeM :

This API will include following attributes:

Field Name Description

1 Order No GeM order number
2 Invoice No GeM invoice number against GeM order
3 Seller PAN Vendor PAN
4 Buyer PAN Govt. Buyer’s PAN
5 Payment Date The date of the payment
6 Paid Amount The amount paid against the invoice
Based on this, Sahay - GeM will be able to identify the lender for the particular invoice and
get the outstanding amount for the corresponding loan from Lender via ​Outstanding Loan
API​. This will facilitate invoice-wise settlement.

This information will be passed on to the Collection Agent.

The Collection agent will credit the outstanding amount to the lender and remaining amount,
if any to the seller.

—————————————————————————————————————

Post the account setup by the Seller,

Upon ‘Change of Bank Account’ by Seller - GeM will trigger a message to Sahay

(This message is triggered to only update Sahay that there is a change made in the Bank
account details on GeM by the Seller)

Field Name Description

1 Vendor PAN Vendor PAN
Bank Account Change Date (UTC Time
2 BANK_Acc_Change_Date stamp)
Also, Sahay - GeM can trigger an API to verify the Bank Account of Seller. In response,
GeM will only say ‘Yes or No’, upon Seller’s Bank account verification, as per their book of
record.

Input from Sahay - GeM to GeM

Field Name Description

1 Vendor PAN Vendor PAN
2 BANK ACC NO BANK Acc NO
3 BANK IFSC CODE BANK IFSC CODE

GeM will only say ‘Yes or No’, upon Seller’s Bank account verification, as per their book of
record.

● Product Specifications:

GEM Seller Financing - Working capital

● LTV On Invoice - ​90%-95% of Approved Invoice value based on CRAC Code

(example Invoice of Rs 100 and if CRAC is Rs 90- LTV will be calculated on Rs 90)

● Tenure : 60 days from date of disbursement

● Invoice to be financed in 20 days of Invoice date -​ to avoid any stale invoice
● Type of Customer - Editing to Bank (ETB) and NTB (New to Bank)
● Constitution Type - Sole Proprietorship
● Interest - Upfront

For Existing to Bank (ETB) customers :

● KYC- Lender can use existing KYC

● Repayment - lender can use existing repayment
● Agreement - Executed via OTP

For New to Bank (NTB) customers :

● KYC- Entity - GSTN API Can be used for Entity KYC and Individual KYC via CKYC,
OKYC and Video KYC
● Repayment - Lender can propose to setup escrow payment from GEM via ESCROW
Virtual account - Bank account details to be update in GEM
● Agreement - Executed via OTP
 Sahay - GeM Repayment Flow

● Repayment Account Setup

 Appendix:

More Data points on GeM :

● GeM platform requires following documents for the approval :

● Company Registration Certificate

● Trademark Certificate or Application of Trademark Certificate
● Vendor Assessment Report
● BIS / NSIC / MSME Registration Certificate, where applicable
● FSSAI License, where applicable
● SKU & HSN (to be entered in the system)
● OEM Authorisation Certification (in case of Reseller)
● Company Website URL (should be functional)