The fintech industry is seeking RRR – relief, reform and regulatory relief

The Indian economy has shown great resilience as it continues on its path to become the fastest growing G20 economy, despite slowing global conditions. The upcoming Union Budget will be crucial to strengthen and secure the Indian economy from the downturn experienced by other countries. It will play a central role in determining the roadmap for India’s growth momentum and defining its recovery, especially when most of the world is staring at a recession.

From businesses to common people, everyone is hoping for relief and reforms in the upcoming budget. The fintech and startup space in particular is looking forward to certain regulations and policy incentives in the upcoming budget that will boost the startup ecosystem, increase the availability of capital and help companies navigate the predicted recession.

Liberalized tax framework: The industry requires some tax relief, particularly under corporate income tax and goods and services tax (GST), which is currently 18%. After the pandemic, the reduction in income tax rates has become the need of the hour. An unresolved issue that needs to be discussed is the expansion of the tax base. Also, generalized reductions in non-GST start-up taxes before annual revenues of Rs 10 crore will help SMEs strengthen their finances.

Easing the funding burden for startups: One of the most important demands the businesses have from the government for the next budget is to further ease the financial burden for startups in the fintech industry. As another measure of tax relief, the industry also wants depreciation on the fixed assets used by the fintech companies. The government should extend support to NBFCs and fintech companies, working on their product in Tier II and Tier III cities, with adequate co-lending limits and rates to develop the fintech industry and become fully digitized.

Activating regulatory environment: The fintech industry operates in a highly regulated area, and any regulatory changes could significantly affect the industry. The government should provide clarity on existing regulations, streamline the process for obtaining licenses and approvals, and reduce the compliance burden for fintech companies. We believe this can help small and medium-sized businesses build a stronger economy and increase jobs.

Access to the global market: There needs to be more focus on including measures to make it easier for fintech companies to access global markets. This could include steps to eliminate barriers to entry and competition in international markets easier for fintech. India’s exports are declining overall and this needs to be pushed by providing better supply chain financing options to exporters. We expect the government to provide financial benefits to exporters to use the ITFS platform for funding to provide financial benefits to exporters and also an impetus to the GIFT city initiative.

Digitize B2B payments: Last year saw many regulatory disruptions for fintech players, leading to less funding and business uncertainty for fintech. We hope to see more policy certainty and a level playing field with banks and NBFCs for fintech. India has seen tremendous progress in B2C payments, but B2B payments are still archaic and need an overhaul. The budget should provide opportunities to push digital B2B payments which can be faster and easier with UPI integration

Technological advances and investments: The government in India should invest more in the technological areas, both manufacturing and services, in the coming decades. This includes investment in AI/ML, blockchain in services and chips, defense equipment, biotechnology, clean energy technologies, etc. that will help India not only profit from the tailwind but also make the country self-sufficient to survive and thrive through some of the major changes which will come over the next few decades. Apart from these, it will be very important for the authorities to enable a more creative regulatory environment to be able to realize the full promise of these technologies in a safer way since many of the implications of these technologies are still not fully developed or understood, and to add many restrictions early on will give away the competitive advantage.

Over the past few years, the fintech industry has witnessed rapid growth and expansion and is expected to continue to do so in the future. The sector needs more budgetary support not only to maintain the existing growth rate, but also to accelerate it.

To facilitate the promotion of financial inclusion, the industry needs some focus on rolling out measures to increase liquidity flow to fintech and certain initiatives that will strengthen the existing digital infrastructure and promote financial inclusion.

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Manish Kumar is the founder and CEO of KredX