Fintech

Union Budget 2023: What fintech industry leaders project

Union Budget 2023

Fintech is no longer regarded as a fad. The industry has now evolved into one of the fastest-growing segments of technology, transforming the way financial services are developed. Since 2023 is nearly among us, every industry in the country is bracing for changes that will more or less support its growth trajectory. In this regard, the fintech industry is not an exception. As the new Union Budget for 2023 approaches, leaders in the fintech industry are already presenting wish lists to Finance Minister Nirmala Sitharaman. According to reports, the finance minister met with specialists in the fintech business in the most recent pre-Budget meeting to solicit their feedback on their expectations for the 2019 Budget to accelerate the sector’s growth and income.

According to the Research and Market research, the fintech market is expected to reach Rs 9.2 billion at a CAGR of 24.96% between 2022 and 2027. Indeed, the business is increasing at a rapid speed as a result of new trends and technology, and the market is seeing growth in digital payments. UPI, credit and debit cards are driving the development.

Budget Expectations: Financial Burden Relief: One of the most significant demands businesses have made of the government for the next Budget is that it reduces the financial burden on start-ups in the fintech industry. The industry also wants tax breaks for depreciation on fixed assets used by fintech companies. Similarly, substantial tax relief must be provided to start-up employees to alleviate the dual taxation issue and reduce the financial burden that Employee Stock Ownership Plans (ESOPs) place on employees.

Increase Financial Inclusion Through Digitalization: The fintech industry predicts increased government aid for stronger connections with banks, which will strengthen the current paradigm. Professionals in the business emphasised the importance of creating a level playing field for both online and offline lenders.

Loan Disbursement Regulations: The fintech sector wants the government to enact regulations that encourage collaboration between banks and loan providers to aid customers in obtaining loans in an accessible manner, whether for personal or business needs.

Sumit Chanda, Founder and CEO, Jarvis Invest-ImResizerSumit Chanda, Founder and CEO, Jarvis Invest, says, “We expect the budget to be favourable for the retail investors. Hopefully, some positive steps should be taken on Capital Gains and income classification which will be a boon for retail investors and traders. We also hope that the FM incentivizes Fintech start-ups, especially those using AI. We can hopefully see positive news for manufacturing, Renewable Energy, Healthcare, and EVs.

Salaried workers are the main source of the country’s tax revenue and any changes in their taxation will have a significant impact on the economic recovery. There have been murmurs about the tax exemption limit is increased to 5 lakhs from the existing 2.5 lakhs. I would certainly look forward to it. It would mean higher disposable income which can lead to higher consumption and investments. This can boost the economy.

We, as a country, have a very good opportunity to become the manufacturing hub to the world. If the manufacturing sector can be incentivized in some form, this dream can be realized. The Central Government can certainly nudge the State Governments to implement the four labour codes. A reduction in the corporate tax will go a long way in making both the manufacturing and the service sectors grow. Any positive news on these fronts will be a big boost to the markets.”

Anand Kumar Bajaj, Founder, MD & CEO, PayNearbyAnand Kumar Bajaj, Founder, MD & CEO, PayNearby, says, “Presently, India’s path to financial inclusion is being paved, courtesy of the ground-breaking financial solutions offered by leading fintech players. A robust tech stack riding on the back of a strong distribution network has opened doors for Bharat to access innovative financial products and services. The work that we are doing to make banking services accessible to all in Bharat is a case in point of the one-of-its-kind infrastructure that we have built to relay these services. However, for these services to reach the citizens in the hinterlands needs technology, security, trust and the necessary Government support. Towards this purpose, Budget-2023 should urgently consider and offer some tax benefits on the total expenditure incurred by fintech involved in the financial inclusion mission. A GST subsidy, even in a small percentage, will go a long way in helping banking services and Government benefits reach the masses with much ease. Plus, this will encourage companies in the financial inclusion space to innovate more and build revolutionizing technologies to make financial services available to everyone, everywhere.

Today, more than 90% of PayNearby’s BC (Business Correspondent) network is committed to operating in tier II and beyond regions, serving as banking hubs in locations with limited financial infrastructure. To ensure the viability of this network in offering uninterrupted services to all across the country, we sincerely hope that in this Budget, the GST and TDS for financial inclusion services at BC outlets to be waived off or at least reduced. This will ensure sustainable growth and inspire more and more last-mile retail banking agents to offer seamless banking services from their stores to all citizens in Bharat.

We are moving into an exciting phase wherein fintech, armed by the BC network, will become the force multipliers in India’s inclusion endeavour. We are positive that this Budget will be a game-changer for the financial services ecosystem, where these small yet significant steps will help bridge the urban-rural divide and bolster India towards the $5 trillion economy benchmark much sooner than later.

Bhavin Patel, CEO and Co-founder of LenDenClubBhavin Patel, CEO and Co-founder of LenDenClub, stated, “Peer-to-Peer lending has emerged as an alternative financing business model recognised by RBI. During the pandemic, the segment has proven to become a mighty source to bridge the current credit gap. However, we need help to strengthen our contribution to the government’s vision of financial inclusion. It would be helpful to receive indirect benefits for the overall digital lending sector, such as incentives or tax benefits.

Additionally, P2P lending has evolved as a prominent investment asset class, ensuring the flow of investments from those with excess to those in need. While we work to meet the credit demands, we need assistance from the government to open the supply side by incentivising P2P lenders with tax exemptions up to a certain income. Further, it should allow bad debt write-offs, enabling defaults to be treated as capital losses during filing returns.

Not just for lenders but also on the borrowers’ side, personal loan repayment can become a part of the exemption under section 80C.

Furthermore, asset-based lending should be allowed to boost the confidence of lenders. This will also encourage innovation in secured lending, while the current innovation is focused on only unsecured lending.”

Deepak Kothari, Co-founder of ftcashDeepak Kothari, Co-founder of ftcash mentioned that “The Union Budget 2023-2024 has the opportunity to help provide the fintech sector with the much-needed impetus. The key areas where government support will go a long way are-

1. Liberalisation and enhancement of credit lines from banks- Currently fintechs collaborate with banks on a one-to-one basis. The provision of a government scheme which provides a sovereign guarantee by the government of such credit lines will help channelise and enhance access to funds for fintech and also allow targeting of certain sectors/segments/regions in a cost-efficient manner.

2. Rationalisation of GST input credit framework in co-lending arrangements- Fintechs today collaborate with other financial services players and invariably in such arrangements there’s a potential loss of Input Credit in the current GST framework. Ensuring that the input credit is fully provided for will go a long way in ensuring that revenue leakages are avoided and benefits can be consequently passed on to the end consumer

3. Enhancement of legal framework for wilful defaulters- The legal resolution for defaulters today is mired in a lengthy process which is inefficient and clogs the legal system. A seamless, efficient and transparent process which provides for a time-bound resolution of cases where EMIs go into default will ensure that the financial services industry is strengthened. For example, today if businesses don’t pay GST, there’s a freeze which happens on the accounts, a similar framework for Sec 138 cheque bounce cases will ensure that wilful default is minimised.

Sumeet Mehta, Cofounder & CEO, LEAD-ImResizerSumeet Mehta, Cofounder & CEO, LEAD, stated, “Policy promotes the use of technology in teaching and learning. The direction and guidance of the Ministry of Education, as per the policy, is to promote multimodal learning so that high quality resources are made available to all students, irrespective of location or background. This can be enabled by increasing the penetration of digital infrastructure in schools and educational institutions. Digital tools and content in smart classrooms are key to enriching students’ learning.

GST exemption on the supply of goods (including TVs/tablets for digital education, currently @28% GST) and services (used for teaching and learning applications and content, currently @18% GST) to educational institutions and intermediaries can reduce the overall cost that is currently passed on to schools and parents. This will make goods and services for education more affordable and will foster the implementation of NEP across the country.

Also Read | Fintech industry seeing new techniques of assessing credit story

Additionally, GST exemption on the printing of school textbooks will make these books more affordable for low-income parents. For the same reason, printing and service of assessments/examination papers that are a part of the curricula in schools should also be exempted from GST.”

Gurjodhpal Singh, CEO, Tide IndiaGurjodhpal Singh, CEO, Tide India, says “The MSME sector has potentially turned out to be a key catalyst for the Indian economy in recent years, considering India is home to over 63 million MSMEs contributing close to 30% of the country’s GDP. Reiterating such a significant figure, it has become imperative for the government and the Fintech syndicates to work in alignment with each other and make the sector stronger, more resilient, and developed in terms of mutual growth and profitability. To achieve the vision of making India a USD 5 trillion economy while creating a new self-reliant nation, the government should introduce a much-needed policy framework mandating large corporates to include the MSME segment in their business models in some or the other way. This can be done by procuring a certain percentage of the priority sector’s business or aiding them with the current technological innovations and marketing tactics to bolster their business growth. Furthermore, the slowdown we saw in the economy last year has caused significant pain to MSMEs due to high-interest rates in the lending landscape inhibiting their operational capabilities. Therefore, soft loans at minimal interest rates or any reduction in the SME lending rates will provide impetus to the sector’s steadfast growth. On the other hand, the rising interest rate would pose a risk to the micro, small and medium-sized enterprises (MSME) portfolio of lenders.

Lastly, while keeping in mind that the whole world is undergoing massive digital transformation, India’s significant chunk of the MSME population that resides in tier 2, 3, and 4 cities lacks digital awareness and inclusion to a great extent. The government must introduce certain initiatives with a focus to train and coach the sector on the technological advancement and marketing front to spur digitisation across the country.”

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