Indian Union Budget 2023: Stimulating FinTech innovation with Digilockers

By Puja Sharma

According to the Indian Finance Minister, Nirmala Sitharaman, the budget for FY23-24, the last full-fledged budget preceding the 2024 general elections, emphasised the importance of Digital KYC, Pan Cards as identification, and Digilockers as well as increased coverage of account aggregators.

After the slow adoption of DigiLocker, expanding its scope on users and types of documents will significantly boost the consumer journey seamlessly over the top of digital public infrastructure. An agriculture accelerator fund and digital public infrastructure for agriculture could lead to the emergence of a new set of Agri-Fintechs, which has been restricted so far due to market constraints. Simplifying KYC by adopting a risk-based approach will ensure faster onboarding of consumers and deepen the journey of Digital India initiatives.

“A comprehensive review of existing regulations by the financial regulators through wider consultation with ecosystem players will further simplify, ease and reduce the cost of compliance. In addition, continued fiscal support to strengthen digital payments infrastructure will ensure continuity in the growth of digital payments in volume and value in the absence of merchant discount rate (MDR) in a few payment rails,” said Abhishant Pant, Founder, of The Fintech Meetup and General Partner, YAN Angel Fund. 

The demand of NBFCs from the finance minister was to advance hassle-free credit access and the government has given a much-needed boost to the MSME sector.  An allocation of Rs. 9000 crores for the credit guarantee revamp scheme starting April 1, 2023, will give a big relief to MSMEs in the current inflationary conditions.

“Presumptive taxation for micro-enterprises with a turnover of Rs. 2 crores, unified filing process, entity-based Digi lockers, and formation of National Financial Information Registry will enable better underwriting of credit to MSMEs. It will help Datatech NBFCs like us bridge the needs of India’s credit-starved business segment. The government has provided the financial sector much-needed momentum, however an active liquidity support system for NBFCs remains a request.” said Shachindra Nath, Vice Chairman and Managing Director, U GRO Capital.

The government’s focus on simplifying processes, expanding FinTech services, and improving bank governance reflects its commitment to economic growth and stability.

The budget is very progressive on all fronts, especially for fintech and personal finance. Fintechs stand to gain tremendously as they will be able to onboard customers faster and meet all compliance requirements using the enhanced scope of Digi locker services. For those serving SMEs, costs of doing business go down as PAN would be the common identifier used. Individual taxpayers have got relief in their tax pay whereas senior citizens can now invest more in government secured Senior Citizens Savings Scheme. Further, changes to the banking regulation act would enhance investor protection and promote innovation.” Swapnil Bhaskar, Head of Strategy, Niyo, a neo-bank for millennials.

“We are delighted to see the government’s continued focus on the rural sector in this year’s Budget as well. MSMEs are the backbone of the growth of India’s economy. Initiatives such as offering relief to MSMEs by returning 95% of the forfeited amount, revamping the credit guarantee scheme, reducing the cost of credit by 1 percent and enabling MSMEs to avail the benefit of presumptive taxation as well as allowing expenditure deduction on payments made undoubtedly showcase the government’s vision for the growth and development of the sector.” said Dilip Modi, Founder, Spice Money. Furthermore, setting up DigiLocker will ensure a faster and more secure way of storing and sharing documents thereby enabling quick turnaround and cost reduction for the sector.

The unprecedented growth of India’s economy fuelled by digital payment initiatives like UPI is a testimony that we are on the right track to becoming a 5 trillion economy.  We look forward to seeing India’s next phase reaping the benefits of the initiatives announced during the Budget session and partnering with the government to drive financial inclusion for the last mile.”

The spirit of resilience has been proven by the 6.3 crore micro, small, and medium firms, which account for 30% of GDP and employ approximately 11 crore people. With sales in numerous industries throughout the MSME sector surpassing 90% of pre-pandemic levels, India’s small firms are rewriting history with enhanced import-export trade and driving business globally. The budget shows positivity and has reduced import duties on raw materials to support Make in India and MSMEs, enhancing competitiveness in global markets and leading to a rise in exports.” said Sunil Kharbanda, Co-Founder & COO, Trezix on the MSMEs, Global Trade and economic growth.