Union Budget 2020 India: India’s advancement to a $5 trillion economy in the next five years is not quite impossible, as some would argue, it just requires a multi-disciplinary approach to complement all the rhetoric that we heard of in the year 2019. To begin with, the government needs to address issues such as the liquidity crisis, drop in consumer spending, concerns on taxation and Zero-MDR (merchant discount rate), all of which have negatively impacted the payments, NBFC, and fintech sectors in terms of revenues and working capital. As we gear up in the new financial year to boost the economy further, the recapitalization of public sector banks and additional tax incentives linked to personal tax and incentives to customers on home-buying can greatly be the star expectations for economic growth.
A report, ‘Fintech and Startups Fueling India’s USD 5 Trillion Economy,’ released by CII and KPMG noted that the FinTech industry will help enable India’s transition to a $5 trillion economy. It is an undeniable fact that rapid developments in the fintech industry over the past few years have aided several industries and improved the day-to-day lives of a massive populace. Fintech lending companies help boost consumer consumption, thereby aiding industry and economic growth.
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However, the question is how can the government enable NBFCs and the fintech industry leads the next wave of growth. Last year’s budget, to help fuel significant economic growth, had recognized startups and the fintech industry with a deep focus on technology and re-skilling programs. This year, the industry hopes that the government will focus on introducing more robust policies and schemes that will facilitate easier operations in business and further encourage the growth of these sectors, especially linked to customer management, KYC systems & processing.
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Another area where the budget needs to focus on is on the Zero MDR regime. When the entire country is going gaga over digital payments, the fintech industry fears a loss of revenue with this policy. We expect the government to provide more clarification on the zero-MDR regime to help businesses to expand further.
A key measure that can help the industry grow is by enabling easy access to capital and the need to build alternate funding models for NBFCs & HFCs. This along with a dedicated refinance window for NBFCs with enhanced roles for NHB & MUDRA is very much the need of the hour. Fintech players should be able to get easier funding from investors and from both traditional and alternate channels to be able to roll out more loans to their customers.
In order to help fintech startups reach out to more customers, electronic KYC should be adopted and promoted. Newly welcomed Video-KYC can be one of the new processes that can be introduced by the Government for authenticating consumers and will make the processes easier for NBFCs, Fintech lenders and other alternate lending platforms, among others.
We urge the government to give a further thrust to the digitalization of financial systems, especially in terms of investment in infrastructure, improving digital literacy and incentivizing digital payments. There is no doubt that better digital infrastructure and easy funding for the fintech industry are the need of the hour. Let’s wait and watch what the budget 2020 holds for us. The combined boost for all industry sectors is much needed to meet the government’s vision of reaching the $5 trillion mark in the next five years.
(Akshay Mehrotra is the Co-Founder and CEO at EarlySalary. Views expressed are the author’s own.)
Source: Financial Express
