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Indian budget 2022: Big tech push for FinTech sector

By Puja Sharma

February 01, 2022

  • Agri-Fintech
  • AI
  • Digital Banking
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The finance minister of India, Nirmala Sitharaman in the FY22-23 union budget announcement gave special emphasis to digital banking and FinTech. The industry leaders welcomed the Digital push and rapid adoption of FinTech services in the remote parts of India including the initiation of 75 digital banks in the 75 districts of India.

The 2022 Union Budget’s focus on FinTech and digital payments platform and ecosystem is a testament to its commitment to realize its vision of an economically self-reliant nation and driving a less-cash economy. The initiation of 75 digital banks will be a landmark move that will provide a hybrid model for those who are still experimenting with digital banking and push digital transactions in India.

“The financial support for the digital payments ecosystem is a welcome move and further reaffirms the Government of India’s digital banking push. This push on digitization will help faster adoption of financial services in rural areas, which will make way for more inclusion in the ecosystem. Additionally, the focus on ‘Ease of doing business is a great step as it will further promote entrepreneurship in the economy and is in line with our Prime Minister’s focus on boosting the startup ecosystem, said Gurjodhpal Singh, CEO, Tide (IN), a UK-based fintech offering business banking solutions.

As a result of initiatives carried out by the government, there has been a paradigm shift in digital transactions in India as there has been an 88% growth in digital transaction volume in the past three years since 2018-19. Around 72% of financial transactions of PSBs are now done through digital channels, with a doubling of customers active on digital channels from 3.4 crores in FY2019-20 to 7.6 crores in FY2020-21.

“FinTech sector will continue to play the role that we have been playing for the past couple of years now, and these policies will further strengthen our role in the ecosystem. Moreover, the decision to interlink MSME portals and added corpus will address the credit shortfall faced by 50.7 million MSMEs in the country, but also help them access formal credit,” Singh added.

On the boost provided for the FinTech Ecosystem – The fintech ecosystem requirements have been well addressed in the budget. Measures to boost skill development through public-private partnerships, and by incentivizing courses on fintech through world-class education institutions will help the workforce and the ecosystem.

“The government’s outlay on capital expenditure includes the proliferation of digital payments, and technology infrastructure expansion for MSMEs, both of which bring much cheer to the ecosystem players as they make efforts to drive digital penetration across India. Not just FinTech, the government’s shout-out to startups across AgriTech, Hitech, EdTech is a clear sign that the technology ecosystem is going to play a major role in achieving not just near-term GDP targets but in the long run, elevate India as a technology-driven economy,” CEO of Mswipe said Ketan Patel said.

For MSMEs, “Interlinking portals such as Udyam, e-shram, NCS, and Aseem to improve credit facilitation for small business is welcome and it will push them to embrace entrepreneurship. Raising and Accelerating MSME Performance (RAMP) program for MSMEs that is slated to be rolled out in the next five years will push a high number of technology companies to come forward with innovative solutions.” he added.

As the Government of India lays the foundation to steer the economy over the Amrit Kaal of the next 25 years, FinTech will continue to play an important role in the country’s financial ecosystem.

For Consumer, “Setting up of Digital Banking Units to mark 75 years of Independence is not just a symbolic honor, but also recognition of digital-first banking approach that the government is keen to pursue to help the larger part of the population, which is new to digital or new to banking, find it easy to access financial services. By choosing to continue with the benefits that the digital payments ecosystem enjoys, the government has reaffirmed its commitment to digital payments and digital financial services as ‘the way forward for consumers. Bringing post offices under the core banking system is a major step to ensuring inclusive and accessible financial services to the remotest of locations in the country.” Patel noted.

“The completely paperless and online e-Bill System for use by all central ministries for their procurements will not only enable the suppliers and contractors to submit online their digitally signed bills and claims but also bring in greater flexibility, transparency, and obvious cost efficiency to MSMEs and corporates. By eliminating manual efforts and errors accompanying these processes, the real gains from this move will be seen in increased working capital management, enhanced transactional speed across the supply chain, as well as improved cash flow,” Rupesh Nambiar, Chief Finance Officer OF Global PayEX said.

For India to become a digital economy, all villages should have the same access to digital resources as urban areas. To augment this, the setting up of 75 digital banking units in 75 districts of the country is a commitment to taking high-end tech to the bottom of the pyramid. This step will ensure that the benefits of digital banking reach every nook and corner of the country in a consumer-friendly manner. The objective of citizen empowerment with digital growth and supporting FinTech will directionally encourage delivery of digitization to India in its 100th year well ahead of time.

“Falcon will be eagerly looking to see how this space emerges and will be one of the first to integrate with the ecosystem as the new digital currency will bring traceability, affordability, reach, and financial literacy across the payments ecosystem. I think the government has given a great push to boost digital payments in India – both through fiscal measures to augment the infrastructure and through specific measures like launching Digital Banking Units and bringing Post Offices to offer core banking services,” Prabhtej Bhatia, Co-founder of embedded payments digital start-up Falcon said.

“This will widen the scale of digital financial infrastructure in the county and also boost the embedded finance space as there will be faster adoption of Fintech solutions from all players targeting the semi-rural and rural parts of the country. Also, this budget has identified the growing importance of FinTech in the economy with several measures such as FinTech courses through world-class institutions to train the workforce in India. This will go down as a seminal decision taken by the government in proliferating the Fintech ecosystem in the country for years to come.” Bhatia added.

Given that ‘inclusive development and ‘financing of investments’ were two of the seven pillars of the Budget, it laid the foundation for faster financial inclusion and expansion of the credit ecosystem.

“We are happy that over the past few years we were able to focus on Aspirational Districts and deliver on one aspect of financial inclusion and the score of 95% is encouraging. Going forward, we will focus to align with the Vibrant Villages Program and will continue focusing on the financial inclusion of farmers and senior citizens at the last mile. However, we wish the GST waiver for Banking Correspondents for financial inclusion services could have been taken into consideration. During Amrit Kaal, while our government aims to achieve the vision for India@100, we pledge to make India a digitally and financially inclusive nation,” Anand Kumar Bajaj, Founder, MD & CEO, PayNearby noted.

The Ministry of Finance has presented a well-rounded, futuristic, and optimistic Union Budget 2022 to propel the digital economy and boost the MSME sector.

“In a bid to make MSMEs more resilient and competitive, the extension of the Emergency Credit Line Guarantee Scheme (ECLGS) till March 2023 is a critical step. This measure will ensure the continued handholding of MSMEs, which accounts for more than 30% of India’s GDP and remains an important engine of economic growth, job creation, income generation, and livelihood support. In addition, the proposal to skill both entrepreneurs and students with the help of technology will empower and enhance the productivity of the country altogether,” he added.

Additionally, Finance Minister Nirmala Sitharaman’s announcement on the allotment of funds through NABARD to finance start-ups for agriculture & rural enterprises along with the plans to launch delivery of hi-tech services for farmers, including the use of Kisan Drones is a great move towards the development of the Agri sector as well as for supporting infopreneurs.

“It is extremely heartening to see the digital economy and fintech technology-enabled development being a key focus area for Budget 2022-23. The government’s proposal of setting up 75 Digital Banking units in 75 districts of the country and providing online fund transfer between post office accounts and bank accounts will help in adding further tailwinds to expand necessary banking services to the last mile and enable us to take a step further towards our goal of financial inclusion through rural empowerment,” Dilip Modi, Founder of Spice Money said.

“The government’s continuous focus on the digital payments ecosystem has paved the way for digital adoption amongst the unbanked and underbanked population of the country especially post the outbreak of the pandemic. We are hopeful that the government’s strong support and initiatives including the introduction of the digital rupee by RBI will help in accelerating the growth for the fintech sector and will create multiple avenues for the underserved parts of the country,” he added.

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