Expectations of the Fintech Industry From the Union Budget of 2019
Ambiguities in the current regulatory environment have been hindering true growth of the country's fintech ecosystem
It is an undisputed fact that fintech has the potential to play a significant role in shaping India's economy in the near future. Fintech has emerged not as a replacer, but as an enabler of the country's financial industry by catering to the erstwhile underserved segments of the population. Realizing the industry's immense potential, the government has been undertaking several key initiatives to make the environment favourable for fintech players. This has resulted in a robust evolution of the fintech industry, with all recent budget sessions witnessing key positive developments aimed at the industry. But there still is a long way to go for the fintech ecosystem to become truly conducive for emerging players to survive and thrive.
With PM Modi's government resuming power for the second time in a row and this being the maiden budget of FM Nirmala Sitharaman, expectations are high among players in the fintech industry in terms of facilitation of digital financial services, funding access, tax relaxation, better regulatory infrastructure, etc. Some of the key expectations of the fintech industry from the Union Budget of 2019 include:
Conducive Regulatory Infrastructure
With technological driven innovation, a strong and responsive regulatory framework has become imperative for the robustly evolving ecosystem of fintech in India. But ambiguities in the current regulatory environment have been hindering true growth of the country's fintech ecosystem. Therefore, ease and unification of compliance with the regulatory requirements will empower players of the fintech industry to follow a proper procedure, enabling them to keep pace with the speed of innovations while avoiding unnecessary costs. The introduction of RBI sandbox comes across as a positive development made in this sphere, and the fintech industry expects more such policies and reforms to be implemented.
The online lending industry has emerged as a massive relief for both individuals and small businesses that have historically been facing a lack of funds and were rendered underserved by traditional financial institutions. But for the digital model to truly thrive, fintech lenders need to have ready access to the credit guarantee schemes being initiated by the government to build a supportive financial structure. For instance, recent government initiatives like that of SIDBI wherein loans can be provided in under an hour, or its subsidiary MUDRA have only been supporting banks, NBFCs, and micro-finance institutions. But their penetration levels are relatively low, because of which a substantial portion of these funds remain unutilized. Therefore, the fintech industry expects the government to extend credit and allow the players to participate in these recent initiatives and other measures being undertaken.
The fintech industry continues to expect higher tax relief which will result in increased investments, thereby serving as a breeding ground for continuous innovations and solutions. For instance, by either removing or lowering Angel Tax further, the government can significantly encourage and facilitate more investments from Indian investors. Moreover, the fintech industry expects the government to consider reducing the GST rates, and take concrete measures to make the structure more transparent and coherent. Lastly, with NBFCs playing an integral role in the country's economic growth, the fintech industry expects the government to extend TDS exemptions for interest payments to NBFCs. Such a measure would result in an ease of capital flow, consequently easing the liquidity crunch in the market in the long run.
A Digital Boost
Financial inclusion within the country remains a critical concern, and digitization has the potential to effectively address the same. While initiatives like Digital India have certainly fast-tracked India's journey towards becoming a digital economy, a further thrust is needed to bring about a transformation in a country that has historically been a cash-led economy. Be it investing in the digital infrastructure, mobilizing access to digital financial services, penetrating deeper and catering to the underserved segments, incentivizing digital transactions, or making the regulatory environment conducive—these policies and reforms need to be diligently planned and implemented to bring about an inclusive growth of the country. Therefore, the fintech industry expects the government to give a further boost to the digital-led financial value chain through the above-mentioned reforms, in order to achieve true financial inclusion in India.