7 Key Fintech Takeaways from India’s New Budget
The Union Budget 2023-24, presented by India’s Finance Minister, Nirmala Sitharaman, is a landmark event that holds immense significance for the country’s financial sector, especially as it relates to fintech.
India is one of the fastest growing fintech markets globally, with an adoption rate of 87 percent, compared to the world average of 64 percent.
This trend is projected to continue, with the fintech market in India expected to reach USD 1 trillion by 2030.
Here are the seven key fintech insights from India’s Budget 2023-24 that are critical to understanding the future direction of the country’s fintech landscape and its impact on the overall financial sector.
The digital rupee to be issued by the Reserve Bank of India
One of the most important announcements in the budget was the introduction of a digital rupee. The Reserve Bank of India will issue the digital rupee from 2022 to 2023.
This move is a significant step forward for the Indian financial sector and fintech industry as it will provide a more secure and efficient digital payment system.
The use of blockchain technology will make transactions more transparent, secure and accessible, especially for the unbanked or underbanked.
Taxation of cryptocurrencies
The budget proposed a 30 percent tax on cryptocurrencies, regardless of whether they are held for short-term or long-term purposes. In addition, any income from the transfer of virtual digital assets will also be taxed at 30 percent.
The budget has also proposed to provide for TDS (Tax Deducted at Source) on payments made regarding transfer of virtual digital assets at the rate of 1 per cent of the consideration above a monetary limit. These measures will bring clarity and stability to India’s cryptocurrency market, which has been largely unregulated.
Setup of digital banking devices
The Budget has proposed to set up 75 Digital Banking Units (DBUs) in 75 districts across India. This will significantly improve financial inclusion, especially in rural areas with limited access to banking services.
The DBUs will offer essential banking services to citizens, including savings accounts, money transfers and insurance. The government’s aim is to reach as many people as possible, and this initiative will help to build a bridge between the urban and rural population when it comes to access to financial services.
Post office core banking system
The 2023 budget has included a proposal to connect all post offices in India to the core banking system. This will increase financial inclusion and accessibility, especially for individuals living in rural or remote areas, allowing for more widespread access to banking services.
The post office network is one of the largest in India and this initiative will give people access to essential banking services including savings accounts, money transfers and insurance.
Focus on digital payments
The finance minister emphasized that the financial support for the digital payment ecosystem, announced in the previous years’ budgets, will continue from 2022 to 2023.
She stated that there will be a focus on promoting digital payments and encouraging the use of payment platforms that are economical and user-friendly.
This will help drive the adoption of digital payments in India, benefiting both consumers and businesses. The government’s focus on digital payments will help make transactions faster, cheaper and more convenient, especially for the unbanked or underbanked.
Extension of DigiLocker services
Expanding DigiLocker services is another positive step that will allow fintech companies to securely store and share documents online with various governments, regulators, banks and other entities.
This practical measure will save costs for fintech companies and simplify the Know Your Customer (KYC) process, making it easier for them to conduct business operations.
The government has proposed expanding the range of document types that are stored in the individual’s DigiLocker.
Individuals currently have access to DigiLocker for the creation and secure storage of digital versions of documents from central and state governments, banking and insurance providers, health certificates and transport documents such as driving licenses and vehicle RCs.
This is a game-changer for fintech companies as it will allow them to authenticate users and provide access to financial services digitally. The expansion of DigiLocker services will benefit individuals, banks and financial institutions by providing a secure and efficient way to store and share data online.
Video-based Know your customer
The government has allowed fintechs to conduct video-based KYC in line with its Digital India mission. Being a publicly verified service, DigiLocker will simplify the KYC process compared to a private service provider.
The Union Budget 2023-24 presents a new approach to the KYC processes in the financial sector, shifting from a ‘one size fits all’ approach to a ‘risk-based’ approach.
Financial sector regulators are also encouraged to implement a KYC system that is in line with the objectives of the Digital India initiative, making the process more streamlined and adaptable.
