1.6 Supply-chain finance and anchor-led lending

Supply-chain finance (SCF) and anchor-led lending are arguably India’s most attractive SME credit segment for a working-capital-focused NBFC. The anchor (a large corporate buyer or seller) provides:

• A captive borrower base.
• Authenticated cash-flow data (invoices, POs, GRNs).
• A natural collection mechanism (the anchor’s own payments).
• A repeat-loan cadence aligned with the trade cycle.

These properties compound: better data + better collection mechanism + repeat borrower = lower credit cost + higher unit economics + higher capital turn. This is why every large NBFC and most banks have SCF programmes, and why this is the second wedge after CA/Tally origination for this platform.

Variants

Variant	What it finances	Borrower	Anchor’s role
Payables / vendor finance / dynamic discounting	Anchor’s payables to its suppliers	Supplier (SME)	Provides the payable obligation that becomes the receivable for the supplier; anchor confirms invoices.
Distributor / dealer finance	Anchor’s receivables (distributor’s payables)	Distributor / dealer (SME)	Provides the invoice flow and sometimes the channel-management oversight; sometimes provides FLDG / DLG.
Invoice discounting (open-market)	Open-market invoices	Seller SME	No formal anchor; verified through GST e-invoice, TReDS, or AA-fetched cash-flow.
TReDS-based	Invoices on the regulated TReDS exchanges (RXIL, Invoicemart, M1xchange)	Seller SME	The regulated TReDS exchange runs the auction, multiple financiers compete on rate.
Anchor-led ecosystem lending (broader)	Working capital, term loans, equipment loans to anchor’s ecosystem	Anchor’s vendors / dealers / customers	Provides the channel, often co-funds or provides FLDG.

Money flow (illustrative: distributor finance)

1. Anchor (e.g., a large FMCG company) sells to distributor on credit (30 – 60 day terms).
2. NBFC offers the distributor a revolving line sized to their monthly purchase from the anchor.
3. On each anchor invoice, NBFC pays the anchor directly on behalf of the distributor (or pays distributor’s anchor-payable account); distributor’s line is drawn.
4. Distributor sells goods to retailers; collects.
5. Distributor repays NBFC at end of credit term.
6. Cycle repeats every month.

For payable / vendor finance the direction reverses — NBFC pays the supplier (SME) immediately on confirmed invoice, anchor pays NBFC on the original payable due date.

Risk owner

NBFC, typically, with optional anchor FLDG / DLG capped per RBI DLG rules (5% cap of portfolio under DOR.CRE.REC.21/21.07.001/2023-24). Anchor FLDG / DLG turns SCF programmes into a risk-shared structure that increases NBFC appetite and reduces SME’s interest rate.

Borrower relationship

Distributor / supplier signs a loan agreement with the NBFC. The anchor signs a programme agreement / tripartite agreement with the NBFC defining:

• Eligible borrowers / borrowers excluded.
• Information sharing (invoice file, GRN file, payment file).
• FLDG / DLG terms if any.
• Anchor’s right to substitute or remove a borrower.

Borrower-facing compliance is the NBFC’s responsibility — KFS, agreement, grievance, all standard.

Underwriting owner

NBFC. Inputs include:

• Anchor’s history with the borrower (months of transaction history, value, returns / disputes).
• GST data (sales / purchases reconciled with anchor data).
• Bank-statement data.
• Bureau (consumer + commercial).
• Sometimes Tally / accounting data.

Underwriting in SCF is heavily anchor-anchored — the anchor’s existing relationship is the strongest single signal. Many SCF programmes underwrite at the programme level (define eligibility rules per anchor) plus a borrower-level credit check layered on top.

Collections owner

NBFC. In distributor finance the collection mechanism is often direct debit from the distributor’s collection account on the agreed repayment date, or via on-anchor-payment trigger (NBFC gets paid before anchor’s next payable cycle).

In payable finance, the anchor’s own payable to the supplier becomes the collection — the anchor pays NBFC on the original payable date, eliminating the collection problem (anchor risk replaces SME risk for the receivable side).

Loan booking and repayments

• Loan booked on NBFC’s books (own-book or co-lent — many SCF books are co-lent with banks because they qualify for PSL).
• Repayments come into an NBFC-owned account, sometimes via a virtual account dedicated to the programme.
• Reconciliation against anchor’s data file is daily.

Fees

• Interest rate on the line: 12% – 18% for distributor finance, slightly lower for confirmed-invoice payable finance.
• Processing fee: 0.5% – 1.5% of sanction.
• Anchor programme fee: NBFC sometimes pays anchor a small fee for the channel; sometimes anchor pays NBFC a tech fee for the platform. Depends on bargaining power.

Regulatory risks

• Factoring Regulation Act, 2011 (amended 2021) — explicit factoring (purchase of receivables) requires factoring-NBFC registration or factoring activity within an NBFC’s permitted activities. Most pure SCF setups use assignment of receivables or secured lending against receivables rather than outright factoring to avoid additional registration.
• TReDS — if participating, requires TReDS-financier onboarding with RXIL / Invoicemart / M1xchange.
• DLG cap if anchor provides FLDG — 5% of portfolio.
• Concentration risk — anchor-led programmes by design concentrate exposure to one anchor’s ecosystem. Internal exposure caps must be set and monitored.
• Anchor-default risk — anchor going under destroys the entire portfolio’s cash-flow assumption.

Technology modules needed

In addition to standard origination + LMS:

• Anchor programme master — define anchor, programme rules, fee structure, eligibility, exclusions.
• Invoice ingestion — bulk file or API import of anchor’s invoices / payment files / dispute files.
• Borrower-anchor relationship — every borrower mapped to one or more anchor programmes.
• Programme-level allocation engine — split sanction by anchor exposure cap, by programme economics.
• Programme-level reporting — anchor sees its own programme MIS (consented).
• Invoice-level transaction ledger — each draw tagged to invoice, each repayment tagged to invoice or set of invoices.

Integrations needed

• Anchor ERP / accounting — for invoice file, GRN file, payment file. Often SFTP daily, sometimes API.
• GST data + e-invoice for cross-verification of invoices.
• TReDS integration if participating.
• Standard NBFC stack (bureau, KYC, BSA, NACH, eSign, etc.).

Unit economics

For a ₹50 Cr distributor-finance book against one large anchor, 45-day average tenure:

Line	Annualised
Gross yield	14% – 17%
Processing fees (annualised at ~8 cycles/yr)	4% – 8% of book
Cost of funds	11% – 13%
Operating cost	1.5% – 3% of book
Credit cost	0.3% – 1.5% (anchor-anchored, low)
Pre-tax ROA	4% – 7% of book

SCF books are usually the highest-ROA segment of an NBFC’s portfolio because credit cost is structurally low — the underwriting is anchored to real cash-flow, the collection is anchored to a known payment, and concentration is the only material risk.

Pros

• Excellent unit economics.
• Low fraud, low credit cost when anchor data is authentic.
• Repeat borrower by design.
• Often co-lendable as PSL.

Cons

• Anchor concentration risk.
• Slow anchor onboarding cycle (each programme takes 3 – 6 months of negotiation).
• Anchor’s commercial leverage means NBFC margins can be squeezed.
• Anchor change of strategy can collapse the programme.

Scalability

High — limited by anchor count and depth. A platform with 5 – 10 programmes can run ₹500 Cr+ of SCF book.

Fit for SME working-capital ₹20–50 lakh, 60–180 days, repeat borrowers

Excellent fit and a second key wedge. SCF is structurally a 30 – 90 day repeat-loan product and ticket sizes for distributor finance commonly fall in ₹20 lakh – ₹50 lakh (depending on anchor and borrower size). The platform should aim for one or two anchor programmes by year 2 as a complement to CA/Tally-led origination.

Sources

• RBI Co-Lending by Banks and NBFCs to Priority Sector, 5 November 2020 (relevant for SCF co-lending).
• Factoring Regulation Act, 2011 as amended by the Factoring Regulation (Amendment) Act, 2021.
• RBI Master Direction – Regulatory Framework for Non-Bank Factors, latest version on rbi.org.in.
• TReDS — RBI Setting up of and operating the Trade Receivables Discounting System (TReDS), December 2014 framework, available at rbi.org.in.
• RXIL (rxil.in), Invoicemart (invoicemart.com), M1xchange (m1xchange.com) — TReDS exchanges.