Statistics still reflect that across the majority of business sectors cash remains king.
The financial health crisis of 2020 has already pushed the government to initiate a slew of measures to sustain the economy in the form of policies and packages. Since 2014, the government has encouraged digital payments and positioned digital enablement through financial inclusion as the cornerstone of the next wave of growth. Statistics still reflect that across the majority of business sectors, cash remains king.
Fintech firms shared with Firstpost a slew of measures the government should announce to boost the sector.
Praveen Agrawal, Co-Head India, OakNorth
We believe that the major theme for this Budget will primarily revolve around technology as an enabler to various sectors and facilitating adequate funding alternatives to Micro, Small and Medium-Sized Enterprises (MSMEs). There will also be a high focus on the creation of employment opportunities for the younger segment, through fostering an environment of innovation in the start-up space. MSMEs have been the biggest employer and growth driver for the Indian economy to date but were adversely affected amidst the COVID-19 crisis due to structural liquidity issues, coupled with high funding costs. With only a small proportion of MSMEs having access to a formal credit system, significant chunks of the face working capital shortages and refinancing constraints, despite the formal financing support offered during the crisis. We are hopeful that this budget will have concrete measures to boost the startup space, particularly fintech, which is proving to be highly effective and efficient in collaborating data and bringing together market participants to establish a healthy lending ecosystem.
Praveen Paulose, MD and CEO, Celusion Technologies
Pandemic in 2020 has already pushed people to be more digital so Internet connectivity and smartphone penetration (digital infrastructure) to Tier 2/3 cities in India to have more penetration for the Digital India initiatives. We would like to see a speed up and incentivise the adoption of regulatory sandboxes and central initiatives like the CKYC/Account Aggregator.
For example, this could create new value in customer experiences and core operations for the Banking and Financial Services industry.
Ketan Doshi, MD, PayPoint India
For the payments industry, the Finance Minister should reconsider the complete elimination of merchant discount rate (MDR) on Rupay and UPI transactions which will support sustainable growth in digital payments. To further the financial inclusion in the country, I feel all transactions under PMJDY should be exempted from the GST levy. Bank accounts opened under PMJDY are basically of low ticket size. However, the operating cost to service this under-served community is very high till it reaches a substantial base hence the exemption. Budget 2021 should have enough measures to infuse liquidity, benefiting SMEs, especially those in the hinterlands. PSU banks must lead this mandates in partnership with fitTech either through co-lending or lead-generation model.
Udit Garg, Founding Member, Goal Teller
The government, in the upcoming Budget, may focus on, inter-alia, imposing COVID-cess on High Net Individuals (HNIs) or companies to bridge the estimated Budget deficits. We feel that instead of levying an additional cess on HNIs, who are already bearing the brunt of amended surcharge rates, GOI can increase the current cess rates from 4 percent to 5 percent for all the taxpayers. This may lead to an overall increase of tax inflow by 6,000-7,000 crores. The government can focus on privatisation and improving the efficiency of critical PSUs (with management incentive programs) to improve the inflow to the government.
Mahesh Ramamoorthy, MD, Banking Solutions, International Market, APAC, FIS
In Budget 2021, the government must provide significant incentives for the promotion of digital payments that aims to drive cash conversion to digital. The fintech industry is playing a pivotal role in providing financial services to grassroots industries viz. agriculture, MSME. Incentivising innovations and business focus in these industries is imperative for India to achieve the goal of galloping to a $5 trillion economy. The government must encourage fintech through a policy framework that encourages the private-public-partnership model. This would go a long way in delivering consumers benefits.
Yogi Sadana, CEO, CASHe and Founding Member, Fintech Association for Consumer Empowerment
A broad wish list includes tax relief, sops on technology and infrastructure spends made by the fintechs to increase credit penetration in the country, enabling increased engagement between fintech startups and banks to support other sectors through organised lending and to create a fund with PSU and large private banks to improve liquidity and access to finance. We would like to see the Budget put provisions in place that would allow fintechs to have access to liquidity by creating a fund within the PSU and large banks which is allocated for lending to the fintech and startup ecosystem without the need to provide hard collaterals which is the current hurdle. Access to liquidity will lead to a greater penetration of formal credit that will not only allow for a quick recovery for fintech firms but also benefit the core customer base that is yet to have access to institutional credit.
Vivek Iyer, Partner, Grant Thornton Bharat LLP
The finance ministry has been thinking of a Banking Investment Company (BIC) model since 2014. The super holding company structure to hold all government holdings of public sector banks will not only bring in transparency and better governance but will also ease fiscal pressure as the BIC will help raise capital more effectively. Hope to see this fructify in Union Budget 2021.
Alok Mittal, CEO and Founder, Indifi Technologies
The economy is currently in a rebuild mode, and hence, sectoral incentives that allow MSMEs to recover, play a pivotal role. Although different sectors have been hit differently, large sectors like transportation, logistics and hospitality come under the worst-hit category. As a result, there needs to be an initiative to provide them with support and recovery measures. Secondly, the wholesale lending market needs to be refuelled, especially with a focus on BBB and A-rated NBFCs. It will be a step in the right direction and help the overall economy recuperate faster in the coming months.
Neel Juriasingani, CEO and Co-Founder, Datacultr
In the fintech industry particularly, the market has been largely expanding with New Age businesses emerging in the market opening up broader avenues to lending to high-risk and new-to-credit borrowers. The sector is on the cusp of a technological revolution; with the pandemic only accelerating the pace of tech adoption. The government must back this growth with favourable policies and encourage digitalisation to provide a further boost and expand financial inclusion across nooks and corners of the country.
Yogendra Kashyap, CEO, RapiPay Fintech
In Budget 2021, we feel there will be more emphasis on newer and emerging technologies for financial inclusion as people have moved quicker towards digitalisation especially post-pandemic. Financial Inclusion has been the focus for the government and there should be a push towards a digital economy for faster adoption. For the tier-2/3/4 cities and the rural population to have seamless banking services at their disposal, there should be higher incentives for banking transactions through BCs so that more and more retailers offer money transfer, micro ATM, AePS etc. services.
Alok Mittal, CEO and Founder, Indifi Technologies
The economy is currently in a rebuild mode, and hence sectoral incentives that allow MSMEs to recover, play a pivotal role. Although different sectors have been hit differently, large sectors like transportation, logistics and hospitality come under the worst-hit category. As a result, there needs to be an initiative to provide them with support and recovery measures. Secondly, the wholesale lending market needs to be refuelled especially with a focus on BBB and A-rated NBFCs. It will be a step in the right direction and help the overall economy recuperate faster in the coming months.
Kumar Abhishek, CEO annd Founder, ToneTag
In Budget 2021, we anticipate major changes and incentives, especially for the fintech sector. The finance minister has been positively vocal about establishing the ‘Indian Fintech footprint’ around the world, and the government is driving campaigns and schemes to encourage migration to the digital space. We are also expecting fiscal policies that encourage banks and financial institutions, especially in rural areas, to partner and work closely with fintech companies to expand their digital service suite and integrate fintech to provide end-to-end processing instead of piecemeal service.
Madhusudan Ekambaram, Co-Founder and CEO, KreditBee and Co-Founder, FACE (Fintech Association for Consumer Empowerment)
The anticipation around the Union Budget 2021 is tremendous, especially for the fintech industry, considering the seam it has picked up in 2020. Given the surging prominence of digital initiatives in multiple facets, further attention needs to be given in the Budget, towards enhancing its application and effectiveness. The multi-pronged implications of the same could be tax and policy reforms for the startups and tech-centric firms, prominent support towards strengthening the digital infrastructure and profound support towards local innovation in the Make in India initiative.
Nityanand Sharma, Co-Founder and CEO, Simpl
Recently, there has been a widening scope of the RBI’s co-origination model, and now the Finance Minister is asking banks to use this model to collaborate with fintechs and share lending risks equally. If this measure comes into effect, it will reflect a growing and necessary acceptance of the key role that fintechs play in the world of banking and finance. As a result, we anticipate that large, traditional banks and financial institutions will partner with fintech firms.
Sameer Aggarwal, Founder and CEO, RevFin
We expect the Budget for FY2022 to enable the EV industry to grow and become one of the largest contributors to the GDP. For the industry, the biggest challenges are access to credit and cost of credit. Therefore, it is now time to make credit available in the market through budgetary intervention. To support this, a debt fund should be created at low-interest rates to provide to all financial institutions lending in the space and synergies to be created for public sector banks to collaborate with fintech platforms for delivery of loans for EVs.
Ankit Gera, Co-Founder, Junio
The rise of fintech in India can be attributed to various macroeconomic factors, including the adoption of cashless society especially post COVID, extensive penetration of smartphones and a supportive regulatory regime. In the upcoming Union Budget, we hope that favourable policies are introduced to ensure large-scale penetration of credit instruments and spur demand in the economy by supporting consumption. Further, we hope that the KYC formalities are relaxed since this comes as a huge challenge for fintech players in terms of their scalability.
Shachindra Nath, Executive Chairman and MD, U GRO Capital
Rescuing the MSME sector from the pandemic should be the top priority for the government in the upcoming Budget 2021.The crucial challenge would be to address lenders’ risk appetite in the face of loan default fears. Lending can be encouraged by bringing the existing Credit Guarantee Scheme in line with the ECLGS. The government must also ensure that NBFCs can access liquidity. This, in turn, would give them the tools to support MSMEs. The 2021 budget needs to set up a dedicated institutional framework for the same (existing or new), which would provide credit enhancements to NBFCs in different formats.
Praveen Dhabhai, CEO, PayWorld
The Budget should take measures to create a physical infrastructure to help the fintech industry and help spread financial inclusion which is the government’s stated objective. The government should also take both fiscal and regulatory measures to further increase the penetration of digital transactions. There is an immediate need for the Budget to look at rationalisation of taxes and reduction of corporate tax for start-ups. The government should reduce corporate tax for start-ups to enable financial empowerment.
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