Budget 2023: The Fintech sector has been a frontrunner for the growth of the India's financial industry. Presently, India, which is among the world’s fastest growing fintech markets, has roughly 6,600 Fintech start-ups with consumers increasingly becoming financially literate with adoption of technology and are frequently buying financial products through apps and online portals.
The sector is rightfully portrayed as a vital constituent for supporting Indian government’s efforts for financial inclusion and digital India, and a bridge to reach the $5 trillion economy target by 2025.
With the upcoming Union Budget 2023-24, the timing has been ideal for the government to introduce relevant policy measures to boost the Indian Fintech sector. As the nation gears up for the Union Budget 2023, let's take a look at what Fintech companies expect for finance and banking ecosystem.
Deepak Aggarwal, Co-Founder, Co-CEO, Moneyboxx
With 65% of population residing in rural India and largely dependent on agriculture and allied sectors, fast and sustainable growth in the sector has long-lasting implications for inclusive growth. While policy initiatives such as priority sector lending targets, Jan-Dhan accounts, Mudra Yojana have led to improved access to credit over the years, further impetus is needed given that rural India received only 9% share of banking credit despite contributing close to half of country’s national income.
New-age, Fintech players are expected to play a pivotal role along with banks in widening financial inclusion and ease of availability of credit. In the upcoming Budget, policies focused on addressing this structural credit gap and measures to boost rural income would be welcome.
Sanjay Sharma, MD and CEO, Aye Finance
The year ahead could well be the point of inflexion for India. As the world veers precariously on the border of a depression and China's global growth engine takes a breather, Indian growth rate seems relatively less affected. This can indeed give us the momentum to pull ahead in the world stakes. The budget should hence focus on supporting growth and stability, instead of conservative incrementalism. As we pull ahead and reach for the 10 trillion dollar GDP, there is no time to loose in addressing the social inequalities. Support for the 70 mn micro scale enterprises is the need of the hour
Rohit Arora, CEO and Co-founder, Biz2Credit and Biz2X-
In the upcoming budget, it is pertinent for the government to send out a clear message around attracting FDI in manufacturing, as well as in the infrastructure segment. India has big opportunity to play in the China Plus One policy, the business strategy which aims to encourage firms and enterprises to expand their operations outside of China. India needs to act fast in helping such businesses set up operations in India as countries like Vietnam are quickly taking a large chunk of businesses away.
In the financial sector, keeping in mind that MSMEs contribute around 29 per cent to India’s GDP and employs a significant number of people, it is imperative for the Government to roll out reforms, including the introduction of a clear roadmap around setting up of standalone digital banks. These banks can play a huge role in increasing credit access to MSMEs as well as to other bigger businesses. Such reforms will also help in attracting long term FDI and create a lot of jobs in the process.
India has already proven its mettle in the fintech space over the past few years and such conducive reforms will further add the ‘big push’ to the fintech sector. India has a veritable competitive advantage in this sector and now, it needs to build more scale to showcase its strength to the world.
Gaurav Jalan, Founder & CEO, mPokket
The constant innovative reforms and technological advancements have provided an impetus to the growth of the FinTech industry in India. With the annual budget just around the corner, it is expected that the government will prioritize the needs of the FinTech players and implement policies to add to their growth trajectory.
It can be expected that the government will bring in reforms to strengthen the partnerships between FinTech institutions and banks. We are expecting that the Finance Minister will take into account the financial burden on start-ups and suggest policies to ease it. In the last budget, she gave major tax reliefs to start-ups and employees, in order to boost their development and to resolve the dual taxation issue and the tax burden that employee stock ownership plans (ESOPs) have on employees. However, the qualification criteria were too stringent, and as a result, very few start-ups could gain benefits from them. So, we can expect that the government will look into this and provide tax relief to budding FinTech start-ups and their employees.
India’s journey to financial inclusion is being paved by exceptional financial solutions provided by FinTech companies. The work that we are doing to make financial services accessible to all is a major positive outcome of digitization. FinTech will continue to grow at a faster rate and penetrate deeper into the country only if rural areas have a strong digitization network.
This sector expects more assistance from the government to develop strong partnerships with banks and financial institutions in order to foster better financial inclusion, both offline and online. The upcoming budget should also consider and offer tax benefits on the total expenditure incurred by FinTech startups, maybe in the form of a small GST subsidy.
Since personal loans now make up the bulk of the loan market, efforts to offer some form of tax refund for people who take out personal loans and education loans, similar to what those who take out house loans receive, would also be appreciated by people who take out such loans.
Rakesh Kaul, Executive Director & CEO – Clix Capital
In India, NBFCs have played an instrumental role in making credit available to small businesses, so as to help them to grow and scale. Considering that MSMEs contribute to one-third of the country’s GDP, account for 48% of exports and create 111 million jobs, it is imperative that the Government protect their interests. This is absolutely indispensable if India aims to become a $5 trillion economy by 2025.
The Government should also create a liquidity support system for NBFCs and broaden the guarantee scheme under CGTMSE, which in turn, will go a long way in ensuring a transparent and seamless flow of credit to MSMEs. Access to formal credit is one of the biggest challenges that MSMEs in the country is facing. Only 16% of MSMEs get access to loans from banks, while the rest has to rely on informal sources. MSMEs currently need around Rs 25.8 lakh crore formal credit.
To empower NBFCs and such new new-age entities, the Government should look at introducing reliefs such as - no TDS on interest income, allowance/deduction on the provision made for NPAs, and centralized and uniform GST registration. Such holistic measures will help NBFCs proliferate deeper into our country making their innovative products and services available to vast cohorts of unserved and underserved sections of the population, including micro and small business owners.
ALSO READ | Budget 2023: What Defence manufacturing industry expects from Union Budget
ALSO READ | Budget 2023: Real estate sector's expectations from Finance Minister Nirmala Sitharaman
