Interim Budget 2024: What are the priorities for the fintech industry? Here's what experts say

Union Budget 2024 expectations: Fintech companies in the country are expecting big movements in the upcoming Interim Budget, which will be presented on February 1, 2024. The fintech industry has already experienced regulatory reforms in the past year, and it anticipates that the upcoming Budget, which will be presented by Finance Minister Nirmala Sitharaman on February 1, will further promote financial inclusion. The Budget is also expected to empower micro, small, and medium enterprises (MSMEs) by providing lending solutions. Furthermore, there is a focus on upskilling initiatives to benefit the country's young workforce.

India's fintech market has been thriving in the last few years, especially during and after the pandemic. The Fintech sector in India, which has been labelled as one of the fastest-growing fintech markets in the world, has witnessed major transformation and growth. According to a report by CAFRAL, out of 14,000 start-ups founded from 2016 to 2021, nearly half were in fintech. The report predicts that by 2030, fintech lending will surpass traditional bank lending. This highlights the immense potential and growth opportunities in India's fintech sector.

In the Union Budget 2023, FM Nirmala Sitharaman said that fintech services in India have been supported by various digital public infrastructure initiatives, such as Aadhaar, PM Jan Dhan Yojana, Video KYC, India Stack, and UPI. In order to further enhance the availability of documents for individuals, the range of documents accessible in DigiLocker will be expanded.

The fintech sector this time, though it won't be a full Budget like Union Budget 2023, wants the government to support small and medium-sized fintechs.

Creation of Fintech Credit Fund

Talking about the changing scenario, the Digital Lending Association of India (DLAI), an organisation of digital lenders in the country, anticipates support from the creation of a dedicated India Fintech Credit Fund (IFCF). This fund aims to offer accessible financial assistance to fintech companies at affordable rates.

"The Digital Lending Association of India (DLAI) expects a dedicated India Fintech Credit Fund (IFCF) to provide affordable finance to fintech companies. The India Fintech Credit Fund (IFCF) is expected to support small and medium-sized fintechs by providing wholesale finance at a reasonable cost to digital lenders. This fund will help incentivize the horizontal movement of fintech lenders beyond Tier-4 cities, provide credit to women, include thin filers, and expand formal finance," said Mahesh Shukla, CEO and Founder, PayMe.

Taxation

"Tax benefits on total expenditure for fintechs involved in the financial empowerment mission. In light of this, we propose specific measures, including a special 5% GST rate for startups working for last-mile empowerment, facilitating crucial financial and digital services to the citizens. A GST subsidy, even a modest one, would significantly ease the reach of financial services and government benefits, encouraging innovation in the financial empowerment space," said Anand Kumar Bajaj, Founder, MD & CEO, PayNearby.

"We also urge for a waiver of GST on all financial services made available from BC outlets, an Income Tax relief for the next seven years, and reduced import duty on essential financial services devices," Bajaj added.

"In the realm of taxation, there is a keen interest in potential GST rationalization measures. Expectations focus on adjustments that streamline processes, eliminate complexities, and foster economic optimization. A simplified and rationalized GST structure is anticipated to ease compliance and stimulate economic growth, promoting an efficient and transparent taxation system," said Manish Kumar, Founder & CEO of KredX.

Digital infrastructure

 “Empowering the entrepreneurial spirit is the cornerstone of economic growth and in the upcoming Budget, we anticipate strategic measures to foster a robust entrepreneur ecosystem. We hope that the Government continues to expand the digital infrastructure to support deep penetration of financial services which reduces the cost of delivery of services. ONDC (Open Network for Digital Commerce and OCEN (Open Credit Enablement Network) shall be supported to create incentives for investment in technology and R&D to ensure this. We also urge the Government to consider the implementation of a uniform KYC framework across all financial services that will not only enhance efficiency but also bolster financial inclusion, Ashish Goyal, Cofounder and CFO of Fibe.

Regulatory flexibility

"The expansion of the Trade Receivables Discounting System (TReDS) is a transformative expectation, not just confined to MSMEs but extending its horizons to non-MSME entities. This strategic move unlocks fresh opportunities, encouraging diversification and aligning with global practices. The incorporation of SEBI-approved funds into TReDS adds another layer, positioning it as a true exchange. This integration opens unique avenues for SEBI market participants and offers TReDS users the option to diversify funds, thus enhancing its global recognition," said Kumar of KredX.

"After the recent regulatory enhancements, allowing tax breaks should create a conducive environment for fintech innovation, empowering fintechs to explore new avenues responsibly. We would be eager to see an emphasis on incentivizing fintech in under-serviced areas which complement our objective of creating a robust distribution infrastructure for financial inclusion. Thus government support is pivotal in catalysing positive change at the grassroots level. Recognition of fintech's role in empowering MSMEs and SMEs, coupled with targeted incentives for Tier 2, 3, and 4 cities, should highlight a strategic push toward lasting financial inclusion," said Aditya Gupta, Founder & CEO Credilio.

"The upcoming Union Budget in 2024 presents an opportune moment to chart the course for the sustainable growth of FinTechs in the Indian economy. Introducing incentives for Fintechs committed to empowering underprivileged SMEs through financial and technical support would be a much-welcomed move. Additional measures, such as maintaining the profitability of state-owned banks, enhancing credit guarantee schemes for MSMEs, introducing PLI schemes, and augmenting subsidies for small businesses, are eagerly anticipated. The financial services industry also expects key announcements pertaining to the management of Non-Performing Assets (NPAs)," said Nirav Choksi, CEO & Co-founder at CredAble

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