Key reforms to revive India’s fintech ecosystem – The New Indian Express
The course for the digitization marathon is just being laid. We are here for the long term. Let me start by saying that India is a bright spot in the midst of the global economic downturn. The World Bank estimates that the country will become the fastest growing economy among the seven largest emerging economies. Our real GDP is estimated at 7%, although the inflation rate has been limited. At this point, a spending boost through Budget 2023 will contribute to our growth story.
Economic incentives to make in India can promote the manufacturing sector. This in turn can increase investment and increase exports. Policy reforms announced in the budget can expand business opportunities and generate new employment opportunities. These investments can strengthen the development of booming industries such as fintech.
MSME is the lifeblood of the Indian economy. A self-sufficient or Atmanirbhar Bharat can truly be achieved only when the country’s 63 million plus MSMEs have a favorable regulatory environment to engage in business activities. While the government has taken a number of steps to empower MSMEs, including a financial relief package and speedy debt resolution, further efforts to improve ease of doing business are welcome.
Basically, I believe that budget 2023 can make it easier to do business by further simplifying the application process. This will mean that MSMEs can start their business within a shorter period of time. This can be supplemented with budget reforms such as an exclusive licensing regime for MSMEs, faster registration and credit support through low-interest or interest-free loans. Enabling MSMEs to sell their products and services abroad, and enabling trade across national borders, can provide a further impetus for growth. To build a sustainable business ecosystem for MSMEs, the Union Budget 2023 may also introduce awareness campaigns and opportunities to collaborate as enablers for MSMEs. This can be supported by financial incentives and a seamless licensing process.
As a member of the fintech sector, I believe there is a need to invest to improve the digital delivery of financial solutions. The budget can help these efforts by encouraging partnerships between banks and fintech firms.
Collaboration platforms facilitated by the authorities to offer customized products will be beneficial to customers.
Fintech startups like us depend on our skilled workforce to advance our business mission. Here, employee stock ownership plans (ESOPs) are a critical tool for attracting talent. Current rules impose tax payment at the time of exercise (purchase) of the ESOP option as well as when the shares are sold. Three years ago, the finance minister had allowed select startups to defer ESOP exercise tax. I hope that Budget 2023 will extend this benefit to all DPIIT recognized startups.
Being nimble and nimble, fintech startups have brought financial services to the doorsteps of Indians. What can contribute to the spread of our services is streamlining the existing licensing process. While all regulations are in place, implementation hiccups need to be ironed out. For example, there may be budget initiatives with regard to building a consolidated licensing regime for fintech companies.
The attractiveness of India is here to stay. A testament to our success is the fact that foreign domiciled companies are keen to relocate their base to India. Some have already begun the process. To enable a seamless move, it can be useful to activate a simple window system.
Lending a helping hand to the MSMEs is one of the central reasons for our industry’s existence. I am of the opinion that budget support for fintech startups in the form of guarantee schemes will be beneficial for channeling the flow of credit.
By 2022, India featured 21 unicorns, three of which were fintech startups. The country has now become the world’s third largest fintech market according to a PwC report. Built on the India Stack and powered by the Unified Payments Interface, our fintech marketplace has grown by leaps and bounds. At current growth rates, this market is estimated to reach a value of $150 billion by 2025.
A series of reforms helped reshape digital banking in 2022. Cardless payments were enabled by credit card UPI linking. Tokenization helped create unique token-based card storage and better security for digital payments. Digital lending rules were adapted to ensure that customers’ privacy was safeguarded.
This year, the Cabinet has approved a ₹2,600 crore scheme to incentivize low-value UPI transactions and promote RuPay debit cards. I am of the opinion that financial incentives are necessary to get customers and companies to go digital. To this end, sops for digital payments continue to be important.
Niti Aayog has already argued for introducing a new category of financial institutions called digital banks. Putting this proposal on fast track through budget allocations could be an extra booster for the digital economy.
Our fintech journey has just begun. India’s demographic dividend has opened up unlimited opportunities for the fintech sector. With an industry size of more than 2,000 fintech entities, there is plenty of growth.
The stamp of approval from Finance Minister Nirmala Sitharaman will be a key motivator to expand our fintech offering from the industry. The course for the digitization marathon is just being laid. We are here for the long term.
Shashank Kumar
Razorpay MD and Co-Founder
