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FinTech Interview Series: Union Budget of India 2022 Special

FinTech Interview Series: Union Budget of India 2022 Special

The Finance Minister of the world’s fastest-growing economy, Nirmala Sitharaman is all set to present her third Union Budget on February 1, 2022. This year, the union budget of India is likely is to focus on the government making strides through several initiatives, including the recently set up Fintech Department and the introduction of Payment Investment Development Fund (PIDF) to incentivize fintechs in India. In parallel, NBFCs and fintech are expecting to see more opportunities from the government to expand the market scope and scale and impact long-term changes in the financial industry. Leading fintech players and startups share their thoughts on what are they expecting from the Government and Union Budget this year. These cover specific areas such as crypto, digital payments & digital banking, blockchain and sustainability in governance, digital gold, rural fintech, and digital lending from CoinSwitch Kuber, Mswipe, Tide India, PayNearby, LenDen Club, 5ire, Gilded, Spice Money & Decimal Technologies, and others.

  • The rise of crypto adoption and the upcoming government regulations on crypto, by Sharan Nair, Chief Business Officer, CoinSwitch Kuber
  • To empower small businesses by propelling digital future and incentivize them to encourage the adoption of digital payments, by Ketan Mehta, CEO, Mswipe
  • Ease of credit access and incentive for digital banking infrastructure, by Gurjodhpal Singh, CEO, Tide (IN)
  • GST and TDS for financial inclusion services at Business Correspondent (BC) outlets across India, by Anand Kumar Bajaj, Founder, MD & CEO, PayNearby
  • Legal recovery of repayments from digital borrowers to further protect the rights of those who lend money, by Bhavin Patel, Co-founder & CEO, LenDenClub
  • The application of blockchain and sustainability in governance and the need to adopt the UN’s sustainability development goals, by Pratik Gauri, Co-founder & CEO, 5ire
  • Digital lending and making improving credit access in India, by Lalit Mehta, Co-founder & CEO, Decimal Technologies
  • potential of digital gold, wealth creation and personal finance in the coming year, by Ashraf Rizvi, Founder & CEO, Gilded
  • Digital and financial adoption with the help of Fintech companies across the country, by Dilip Modi, Founder, Spice Money
  • Effective taxation system along with detailed clarity for crypto industry in India, by Gaurav Dahake, Founder & CEO, Bitbns
  • Rise of digital banking and  credit consumption landscape in India, by Anurag Sinha, Co-founder & CEO, FPL Technologies
  • Digital technologies in B2B and payment innovation to tackle supply chain challenges and eradicate frictions by Narayan ‘Naru’ Ramamoorthy, Chief Revenue Officer, Global PayEX

We Stand With the Government’s Intent of Taking Digitization to the Last Mile

Anand Kumar BajajAnand Kumar Bajaj, Founder, MD & CEO, PayNearby

“The digital payments space has proved its mettle as a stable growth avenue during the pandemic. A positive impact was seen on digital payments due to benign taxation for self-service digital customers. To ensure the same benefits reach the less-savvy citizens, our government could waive GST and TDS for financial inclusion services at Business Correspondent (BC) outlets across India. A GST and TDS waiver will help reduce the cost of offering seamless financial services and help high-end tech reach the technology-oblivious segment. We stand with the government’s intent of taking digitization to the last mile and passing the GST waiver benefit to ‌end-users as this will push for greater financial inclusion and a digital economy in the country.

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Moreover,  low-income citizens are mostly catered to by low-earning retailers who barely cross the value of taxable income, and hence, do not file IT returns to claim a refund of TDS. Thus, TDS is only a cost to them and not a refundable deduction because they do not know how to take a refund by filing returns. We sincerely hope that TDS for income below ₹ 50,000 a year can be waived off. We are positive that this Budget will consider the grim working condition of the BC network and make the needful regulatory changes to ensure the viability of a community that has been vital in driving the cause of financial inclusion and democratization of digital payments in the country.”

Follow Anand @anandkbajaj

Fintech Apps Introduced an Array of New-Age Platforms for Mobile Commerce

Anurag Sinha, Co-founder & CEO, FPL Technologies

“The Fintech space has not only accelerated the ‘Digital India’ initiative by years, but introduced an array of new-age platforms powered by super apps offering multiple services through few swipes on a mobile – significantly influencing digital adoption across the spectrum including payments and credit. While the pandemic triggered a steep rise in demand for consumer credit, it also highlighted the lack of credit penetration in the country. However, given the rise of smartphone usage, shift to digital avenues and the increasing number of digitally-savvy consumers, licensed digital banks can effectively enhance reach and bridge this gap. A digital bank license regime will therefore enable fintechs to leverage their tech-stack optimally to create credit products and user experience which will redefine the investment and consumption landscape in the country.”

Follow Anurag @sinhaanurag14

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Finding a Balance with Crypto Development and Job Creation

Gaurav Dahake, Founder & CEO, Bitbns

“From the upcoming union budget, we expect clarity in terms of how crypto transactions will get regulated. There have been many discussions going around in the crypto space; however, no concrete output so far. As an exchange, we have been working on this along with the finance ministry, creating favorable regulations. We have shared deeper insights and statistics that showcase the size of the industry, the scale, and the growth rate it offers. How critical it is to various vital pillars of the economy, including employment creation and how people have been interacting with different crypto products that would ultimately help grow the Indian economy. Therefore, with the upcoming union budget, we expect detailed clarity on how it will be regulated and an introduction to a tax regime that would be more fruitful. 2021 was the most significant year in terms of how things shaped up for the crypto industry in India and as a crypto community. With a robust mechanism in place, 2022 would be the year of mainstream crypto adoption.”

B2B SaaS, Democratization and Automation of the Supply Chain using Fintech Solutions

Narayan ‘Naru’ Ramamoorthy, Chief Revenue Officer, Global PayEX

“As the Indian economy recovers from the impact of the COVID-19 pandemic, the upcoming Union Budget of 2022-23 will be significant in transforming India from a US$2.7 trillion to a US$5 trillion economy. A key to achieving this is to enhance productivity across the B2B supply chain, including Purchase Orders (PO), invoices, transport documents, goods & service receipt notes, payments, reconciliation and financing/lending. Over the past few years the government and regulators along with Fintech players have taken several initiatives on this front focused on payments, invoices, tax reconciliation and SME financing. For instance driving growth and adoption for e-NACH, e-Invoicing, Tax Credit Statement (Form 26AS), GSTR1 (sales return), GST2A (purchase-related dynamic tax return), GST2B (Input Tax Credit), and MSME lending platforms like TReDS.

This year, we hope the government and Union Budget will focus on further enabling working capital efficiency and productivity across the B2B supply chain and also help the rapidly evolving B2B SaaS companies and ecosystem in India. Considering the ongoing supply chain challenges across the globe, we believe some key areas that will help enhance supply chain efficiency and productivity include continued incentives for adoption of digital technologies in B2B, payment innovation such as open banking, higher limits for eNACH, additional data and measures/laws to ensure MSMEs (and all customers) get paid on time, and building further on the e-Invoice, e-way bill,and GST compliance success. For e.g. can customers get a validated invoice directly from the Govt e-Invoice portal, which will add huge AP automation and payment efficiencies?

Lastly, B2B SaaS companies can play an important role in the democratization and automation of the supply chain, which will enable the digital transformation of Indian Economy. I hope the Government in its role as an India GDP enabler will continue working closely with B2B SaaS companies to accelerate the India digitization story.”

The Rural Sector Will Play a Huge Part in Achieving the Economic Landmark of $5Trillion

Dilip Modi, Founder, Spice Money

“The fintech industry has fared really well in the last two years with the pandemic playing a key role in the digital adoption of financial services across the country. With the government making strides through several initiatives including the recently set up Fintech Department and the introduction of Payment Investment Development Fund (PIDF), the sector is expecting to see more opportunities and initiatives being taken forward by the government that will help in the expansion of the market, influence customer behavior, and impact long term changes in the financial industry.

As our country sets upon the goal of hitting the $5-trillion mark by 2025, I expect the digital economy to grow even further, with a majority of India’s population and small businesses adopting digital means to access payments and financial services. The rural sector will play a huge part in achieving this economic landmark, and the upcoming Union Budget 2022-23 should ensure there’s a special focus on bolstering rural development. Exemptions on procurement of point of sale terminals, GST rates for rural banking agents remitting funds among households, and subsidies to compensate for merchant discount rate (MDR) waiver are among some of the measures that will help in promoting digital awareness and initiatives across the country.”

Fintech Players Willing to Work With the Government to Curb the Menace of the Illegal Digital Lending Apps

Lalit Mehta, Co-founder & CEO, Decimal Technologies

“2021 was a transformative year for the fintech industry with significant technology adoption in financial services. While traditional lending still accounts as a major credit provider in India, digital lending has picked up the pace with the ease of the process, less paperwork, and the use of alternate data sources, making it a key enabler for the MSME sector.

Fintech players have already shown willingness to work with the government to curb the menace of illegal digital lending apps. Budget 2022 should introduce regulations that will help in greater credit access to MSMEs and curbing illegal activities while building trust in the digital lending process for the last mile. In line with the government’s goal of creating a digital economy, introducing credit schemes will incentivise the sector and help in providing timely credit to MSMEs that have struggled due to the lack of credit accessibility through traditional means of lending which has directly affected their business opportunity. We have also seen a rise in the number of start-ups that have turned unicorns in the last year that showcases the potential of the startup ecosystem in India. We expect the government to introduce regulatory changes that would create an easy line of access for start-ups & MSMEs to secure credit from online lending players. This will further help in boosting our economy”.

Crypto Technology and Blockchain Are Long-Term Phenomena That Are Not Going Away

Pratik Gauri, Co-founder & CEO, 5ire

“Crypto technology and blockchain are long-term phenomena that are not going away.

And as the government regulations focus on protecting its constituency from the bad it does, it should also look towards utilizing its power of good for better governance and accountability.  India has been a significant player in developing solutions for the rest of the world with modern technology; it is high time we become a model of utilizing it ourselves.

The Union budget should include more resources to make our cities into more efficient, better governed, smart cities.  We can create models in infinite ways, from more robust policing to e-voting, to more efficient ways to provide public services leveraging blockchain. The Union budget can aspire to not only reflect the value these services deliver day-to-day but to audit, be accountable, and find ways to provide a groundswell in the adoption of blockchain technology in the meat and bones of the largest democracy in the world.

Lastly, the Union Budget 2022 can be a starting point for adopting the UN 2030 Sustainability goals not only in words but in spirit to address a spectrum of work areas, chief among them environmental sustainability, or the intentional and careful use of natural capital such as water, air, solar, mineral resources, timber, and land.”

Peer-to-Peer (P2P) Lending and Taxation System

Bhavin Patel, Co-founder & CEO, LenDenClub

“The economy is projected to gradually return to its previous trajectory, with fiscal priorities in the upcoming budget invigorating it. A regulatory body to oversee payment recovery is the need of the hour. An enhanced procedural aid to the legal recovery of repayments from digital borrowers to further protect the rights of those who lend money. Such a specialized government vehicle to oversee fintech could not only help startups run more effectively, following compliance requirements, but it would eliminate possible fraudsters.

Returns from investments in Peer-to-Peer (P2P) Lending could be exempted from tax under Section 80C of Income Tax law, or a different provision could be carved out to reduce tax rates such as tax exemption for gains below Rs 20,000. This will encourage people across geographies to invest in P2P lending, making funds accessible on multiple platforms. P2P lending plays a significant role in empowering small businesses in India. Tax benefits in P2P lending will magnify the growth of businesses when capital from P2P platforms is diverted to the sector.

The pandemic has resulted in significant job losses, primarily due to people’s inability to keep up with evolving technology. The way the government is spreading awareness is remarkable. Further to that, setting up avenues for advanced technical education, for instance, could help it drive so much further. Presently, India requires professionals with technical and financial competence to conduct the Fintech revolution. More institutions that provide formal education and certifications are needed to create a skilled group of individuals required to grow P2P lending platforms and the Fintech industry.”

Time to Focus on Financial Inclusion using Fintech Apps

Gurjodhpal Singh, CEO Tide(IN)

“This is the third year of the pandemic and MSMEs have been struggling all through since early 2020, several small businesses had to downsize or shut shop as they were challenged by severe liquidity crunch and dipping demand. Being central to the economy, MSMEs need assistance to be back on track and government can provide that much-needed support through a stronger policy thrust. Unavailability of working capital, cost of compliance and taxation are potential challenges that need be addressed. We are looking forward to a budget that will further push for digitization. Significant spends and allowances for infrastructure, especially digital banking infrastructure will also be an important ingredient for the success of both, the budget and MSMEs. These steps can boost financial inclusion to a great extent. Lastly, steps with focus on new businesses and enabling entrepreneurship are key to provide the much-needed impetus for the sector.”

SMEs will Reap Huge Benefits from Digital Payments Technology

Ketan Patel, CEO, Mswipe

“The SME sector is the backbone of the Indian economy. In the upcoming budget, we expect the Government to make announcements that will empower small businesses thereby reviving the economy from the impact of the pandemic. In November 2021, the government announced the Special Credit Linked Capital Subsidy Scheme for the MSMEs (Micro Small and Medium Enterprises) in the services sector. This should be extended to SMEs whose turnover is less than Rs. 5 crore as it will help them procure service equipment through institutional credit for the advancement of their technology. The Government should also look at tax breaks for companies providing technical support to MSMEs.

At a time when we are expecting the third wave of Covid to hit economic activity and businesses are facing difficult times, the Government must take measures to meet the SME lending requirements. Subsidizing the cost of funds to NBFCs that focus on lending to small merchants for loans below Rs. 20 lakhs is way to ensure easy access to credit. Besides, we expect the Finance Minister to increase credit guarantee for lending while also providing relief in terms of tax sops or subsidizing manpower costs for digital players to promote digital payments in tier 3 to 6 towns. Lastly, this Budget should further look at propelling the country towards a digital future. While multiple initiatives have been undertaken to promote digital payments, the Government must look at given some form of incentive to small businesses to encourage the adoption of digital payments and further strengthen the payment infrastructure of the country, especially in smaller towns.”

We Need Regularized Environment to Encourage  Crypto Investing Journeys

Sharan Nair, Chief Business Officer, CoinSwitch Kuber

“Various macroeconomic developments in India and the world over the last year have led to a rise in crypto adoption in India. Today, leading crypto exchanges follow strict self-regulatory practices to ensure customer protection. We hope the upcoming Union Budget will bring in regulatory clarity and help standardize best practices, address misconceptions around this emerging asset class. We believe a regularized environment will encourage more Indians to start their crypto investing journey, promoting financial inclusion in line with the government’s vision.”

The Future of Wealth Tech in India

Ashraf Rizvi, Founder & CEO, Gilded

“Gold has always been an important part of savings/ investment/ wealth portfolios not only in India but also across the world. In India, however, investment in gold is as much a cultural phenomenon as it is a financial one. This cultural tradition has adapted to the times with the introduction of digital gold. This new, convenient, and safer way to access physical gold has seen increased investments from new-age first-time investors. Millennial and Gen Z age categories undoubtedly take to this storage-proof, quality-assured, easy-to-transact new-age asset. Multiple wealth-tech applications have come to the fore, highlighting the growing need for a progressive regulatory framework for this asset class.

While gold has been a stable store of value with positive returns over the historical long term, the future demand for the digital alternative will depend in no small part on government regulations and policies. The Union Budget should be looking at formulating transparent guidelines for investor protection and chalking out a clearly defined regulatory framework consistent with other parts of the gold industry. Currently, capital gains on profits from the sale of gold can be as high as 20% compared to profits on shares taxed at 10%. An alignment among the tax regimes for investments would give investors greater flexibility in choosing the assets that best fit their needs as a store of value and foundation for wealth creation.

Increasingly, the world will look for fast, efficient, cost-effective, and environmentally friendly ways to assign and move value without excessive paperwork or the need to transport physical objects. Digital gold is an essential first step in this technological evolution. The Union Budget 2022 can bring in proper regulatory guidance, framework, and business incentives, and pave the way for India to become a leader in developing the capabilities, technology, and infrastructure necessary to digitize physical gold assets.”

Investments Important for Greater Adoption of Digital Payments Methods Like UPI, AePS, QR Codes

Mandar Agashe, Vice-Chairman & MD, Sarvatra Technologies

There have been positive signs of economic recovery following the pandemic’s severe crisis. The government’s ongoing push has resulted in greater adoption of digital payments methods like UPI, AePS, QR codes, and others, and individuals have become accustomed to transacting digitally. Digital payments can expand their network to further parts of the country, and to do so; the budget must include bold policy interventions to build digital infrastructure, which will eventually aid in the digitization of the entire economy.

Since the country only has 5.2 million active POS machines, the budget should include tax incentives to encourage the use of PoS/Micro ATM devices, which are significantly more cost-effective and infrastructure-wise less demanding than ATMs. Further, the sector would welcome a GST exemption for merchants who accept digital payments; this measure will encourage further digital adoption, particularly in semi-urban and rural markets, where digital payments are still scarce.

In the end, we would hope the budget put a special emphasis on advancing the country’s FinTech ecosystem as the FinTech industry can boost India’s economy to the position it deserves.

Shivendra Nigam, CFO, Cantabil Retail India 

Since 2020, the Indian retail sector, and especially non-essential semi-perishable segments like fashion retail, have been substantially affected by regular COVID disruptions. While various government initiatives under Atmanirbhar Bharat have helped the sector stay afloat, we are looking forward to more concrete measures in reviving the industry. Fashion retail had made a 15 to 17% y-o-y recovery in 2021 around September, but that is on the lower base of 2020.

The industry is looking forward to assessing the draft of the National Retail Policy, which is a crucial step towards streamlining retail trade and the development of all formats of the retail trade sector. 

We further hope that the Hon’ble Finance Minister Smt Nirmala Sitharaman would consider restructuring of GST formalities specifically delay in getting Input credit by monthly filers due to quarterly filing of returns by quarterly filers. Furthermore, as e-commerce has surged since pandemic, incentivizing technology adoption and offering financial stimuli to strengthen supply chain and distribution network would further help the industry. We are optimistic that the Budget will include new policy incentives to provide further impetus to the retail sector in 2022.

Thank you so much for sharing your insights with our Fintech audience!

[To share your insights with us, please write to sghosh@martechseries.com]

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