Friday, January 29, 2021

The budget expectations from Yogi Sadana, CEO - CASHe and Founding Member of Fintech Association for Consumer Empowerment (FACE).

1.       What can the fintech industry expect from the budget this year?


As the economy is set to recover post the Covid-19 pandemic, the expectations of fintech industry and the startup ecosystem from the upcoming Union Budget are also riding high. A broad wish list from the fintech industry includes tax relief, sops on technology and infrastructure spends made by the fintechs to increase credit penetration in the country, enable more engagement between fintech startups and banks to support other sectors through organized lending and to create a fund with PSU and large Private banks to improve liquidity and access to finance for fintechs.


The Government’s push for more Atmanirbhar Bharat (self-reliant India) will manifest itself in the budget via the introduction of a slew of provisions for the financial industry. These provisions will be aimed at lubricating the financial engine of the country by improving operational efficiency as well as governance standards for banks/NBFCs.


Since most efficiency gains are likely to be originated through the use of technology, Fintechs can expect to see a widening market for their services. Open banking models are likely to be more widely accepted, while the simplification of compliance procedures will enable RegTech models to play a more prominent role as well. 


The 2021 budget will set the base that will allow India’s Fintech industry to mature faster and cater to a wider range of customers by providing digital alternatives. The potential savings that could be realized as a result of this transition to digital will only accelerate the growth for the industry. 


2.       What do you think the budget will have for startups?


Coming out of the pandemic, we expect the government to elevate the startup ecosystem including the MSMEs which is often considered as one of the biggest growth drivers of the economy. Certain policy incentives accelerate the business growth of startup will be very much appreciated. Angel Tax norms can be further eased to benefit the start-ups. Also, the GST structure can be made less complex and improve taxation, particularly for startups and MSMEs to make tax compliance simpler.


3.       What do fintech startups need from the budget this year? What do you want to see in the budget for the finance industry?


For this year, the needs of Fintechs, NBFCs, and MSMEs are intertwined. The IL&FS debacle, combined with the devastating effects of the nationwide lockdown has resulted in the drying up of all the funding streams available to NBFCs and Fintechs. This is distressing for all three parties because Fintechs/NBFCs play a key role in bringing several MSMEs into the institutional credit ecosystem.


As a Fintech that thrives on lending, 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 Fintech and startup eco system without the need to provide hard collaterals which is the current hurdle. Access to liquidity to Fintechs 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.


GST reimbursement on certain kind of expenses including spends on technology and infrastructure are the other expectations from the Budget.


4.       What's one thing you according to you that the fintech industry wants, but the government is not likely to deliver?


The reintroduction of MDR (merchant discount rate) is something that prominent fintech firms have been clamoring for since it was abolished. The lack of MDR, despite being good news for merchants doesn’t really bode well for financial institutions, especially younger fintechs as they will not have any incentive to build newer, exciting products.


All in all, the fintech industry needs support from the government to create a eco-system in which the industry can thrive, drive more digitization and continue to add millions of underserved customers in the formal credit system.

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