Indian Startup Ecosystem welcomes innovation in fintech, expansion of digital infra, banking & payments

While presenting her fourth union budget, Finance Minister Nirmala Sitharaman has made several announcements for the fintech industry to further strengthen the digital payments ecosystem and lay down the government vision for financial inclusion via digitalization.

The most important announcement made by FM Sithraman was the introduction of a Digital Rupee, which will be issued by The Reserve Bank of India (RBI) in the upcoming months. She had also proposed to set up 75 Digital Banking Units (DBUs) in 75 districts in the country by Scheduled Commercial Banks.

In addition, FM Sitharaman said the financial support for the digital payments ecosystem announced in the previous Budget will continue in 2022-23. The government last year had announced a Rs 1500 crore allocation to boost digital payments adoption in the country.

The government will also look to boost the overall fintech ecosystem by promoting the use of payments platforms that are economical and user-friendly, FM Sitharaman said.

"In recent years, digital banking, digital payments, and fintech innovations have grown at a rapid pace in the country. The government is continuously encouraging these sectors to ensure that the benefits of digital banking reach every nook and corner of the country in a consumer-friendly manner," She added.

Further, She said in 2022, 100% of 150,000 post offices will come on the core banking system enabling financial inclusion and access to accounts through net banking, mobile banking, ATMs, and will also provide online transfer of funds between post office accounts and bank accounts. The move will help farmers and senior citizens who have accounts in the rural areas.

Here's how fintech startups and entrepreneurs responded to the announcements made in the Union Budget 2022:

Suhail Sameer, CEO of BharatPe

THIS BUDGET WILL FUEL THE NEXT LEVEL OF GROWTH OF THE INDIAN ECONOMY.

Suhail Sameer

The budget has re-emphasized that digital payments and fintech innovations have grown at a rapid pace in the country. The government is continuously providing thrust to ensure digital banking reaches every new nook and corner of the country and this is extremely encouraging.

We strongly appreciate the government’s decision to set up 75 digital banking units in the country. This will help promote digital payments aggressively in the country and drive financial inclusion further. The introduction of the RBI-approved digital rupee is another landmark move- it will disrupt the Indian payment system and add a new dimension to the financial system. ‘One Nation, One Registration’ is a great initiative as it will facilitate ease of living and doing business.

Gurjodhpal Singh, CEO, Tide (IN)

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 make way for more inclusion in the ecosystem.

The focus on ‘Ease of doing business’ is a great step, as it will further promote entrepreneurship in the economy.

Gurjodhpal Singh

Fintechs 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 is the much-needed support at this hour.

Vikesh Agrawal, CEO, AjvaFintech

There have been concentrated efforts in the budget to fill the much-needed credit gap for the stressed sector – ELCGS extension specially for the struggling hospitality sector was much needed, the sector, however, will take some more time to revive, unlike other sectors. 

The proposed CGTMSE revamp will help the micro sector, which could not avail ECLGS earlier because they did not have existing credit outstanding, which was the basic requirement for availing ECLGS. PLI extension to more sectors and increased fund allocation shall boost the MSME being backward linked.

Payment delays have been a big challenge for MSME for government procurement, 75 percent bill payment within 10 days is a welcome step. Also, steps on going paperless, digital acceptance of invoices are good steps in digitizing the value chain.

Umesh Mohanan, Executive Director and CEO, Indel Money

By extending the Emergency Credit Line Guarantee Scheme (ECLGS) for Micro, Small and Medium Enterprises (MSMEs) by one more year, the Finance Minister, Nirmala Sitharaman, has addressed the wider issue of credit flows to small businesses, which is critical for a faster pace in economic recovery and job creation.

This along with the proposed introduction of digital currency by the Reserve Bank of India (RBI) sooner than later will not only see the credit needs of MSMEs addressed on tap and on time going forward but also keep the asset quality of lenders to the sector intact despite the Omicron wave adding to the risks.

This is a big positive for the business growth of MSME-focused lenders like us.

Umesh Mohanan

Ritesh Jain, Co-founder of Flexiloans.com

The budget will significantly boost digitization, MSME growth, and infrastructure. It can turn out to be a UPI moment for healthcare and education. Additional steps could have been taken to boost direct consumption demand.

For the fintech sector, digitization initiatives and subsidization of MDR will continue to help customers adapt to digital transactions.

Ritesh Jain

However, this will also continue the overhang of providing these services viably by the service providers. Central Bank digital currency (CBDC) will give a big push to digital money, and in the future, many use cases will be built on top of CBDC. Announcements for the launch of 75 digital banking units and bringing Indian Post under the banking stack will bring a big push to digitization in the banking sector.

Shalini Warrier, Executive Director, Federal Bank

We are delighted with the key announcements made in the Budget presented by the Hon’ble Finance Minister that is designed to enhance the pace of digital transformation in the country. Setting up 75 Digital Banking Units in 75 Districts, the introduction of Digital Rupee by the Reserve Bank of India on the back of blockchain technology are just two examples of what we can expect in the coming days.

Our mantra of “Digital at the fore, Human at the core” remains at the core of our customer offering and announcements such as these will go a long way, we believe, in making digital a way of life for our customers.

Harsh Pokharna, Co-founder & CEO, OkCredit

MSME sector to some extent. However, the Rs 6,000 crore allocated towards RAMP to enhance MSME performance is inadequate and the government might want to re-look at the allocation for five years.

Interlinking Udyam, e-Shram, NCS, and ASEEM portals will help the government, banks, and small businesses get a true picture of the available workforce and will also help in mapping skill requirements based on demand in the market.

On digital payments, the government has reiterated its commitment to continue with last year's measures. We will be looking forward to RBI's intent of UPI on feature phones, which will be a gamechanger. It was not in the Budget but could give a huge push to the digital payments ecosystem.

Jatin Bhasin, Founder, SaveIN

Union Budget 2022 is extremely progressive and forward-looking in nature. Especially for startups, the tax exemption to eligible startups, incorporated before 31st March 2023 is going to provide a much-needed cash flow boost to startups in their formative years.

Setting up an Open platform under the National Digital Health Ecosystem is a welcome move and much needed with an aim to accelerate digital health push.

The fintech sector has a decisive role to play in furthering the accessibility and affordability of healthcare products and services.

Jatin Bhasin

Sumit Chhazed, Co-founder, OTO Capital

The Union Budget 2022 has laid down relevant policies for the faster adoption of Electric vehicles. The government’s announcement to bring Battery Swapping Policy would meet the issue of limited charging stations and hence increase EV adoption by the masses.

The encouragement of private sectors to bring up new and innovative business models to enhance the efficiency in the EV ecosystem is the right start as it would lead to much-needed disruption in this space by start-ups. Allocation of funds to reduce carbon intensity in vehicles is in a way directed towards the faster adoption of EVs.

Chandra Shekhar Ghosh, MD and CEO, Bandhan Bank

The Union Budget for 2022-23 seeks to support the recent economic growth momentum India has seen, and help it sustain over the long term. The substantial rise in planned capital expenditure for creation of infrastructure, focus on affordable housing, welfare & development of MSMEs, and the farm economy will prepare India for the next phase of growth.

This can lead to creation of millions of new jobs, helping India leverage its young demographic dividend. The new business opportunities and enterprises that will come up due to these projects will also benefit the banking sector.

Navneet Gupta, Founder and CEO, YPay

India’s fintech system was a silver lining in the difficult times of lockdown and the pandemic.

The nation has been bullish with digital payments, and the current budget has further fueled the same by announcing 75 digital banking units in 75 districts.

Navneet Gupta

The inclusion of 1.5 lakh post offices under a banking system with digital infrastructure enablement will promote financial inclusion, and accelerate shifting micro-economy in the mainstream banking system. Gradually, all the efforts will strengthen credit access, and payments in the MSME system will certainly reflect the nation's economic growth at large.

Madhusudan Ekambaram, Co-founder and CEO, KreditBee

Union Budget 2022-23 had special emphasis on Financial Inclusion, technology adoption and entrepreneurship in the Union Budget 2022 -23, which is highly appreciable. Initiatives like Desh stack e-portal and interlinking of Udyam, e-shram, NCS and Aseem portals will surely contribute to the Digital Infrastructure and entrepreneurial push.

The introduction of CBDC, leveraging blockchain technology will influence digital transactions and hence its implementation process will be something to pay attention to.

Madhusudan Ekambaram

Raghunandan G, Founder & CEO, Zolve

With this budget, investors at large were hoping to see an update on Crypto and other digital assets. The introduction of ‘Digital Rupee’ goes on to show the acceptance of digital currency and digital assets nationwide, and provides a pathway for India to play a more proactive role in the international financial arena.

With clarity on the taxation implications on digital assets, it is now set to go mainstream. Coupled with the Government’s efforts to boost the overall fintech ecosystem in this Budget by promoting economical and user-friendly payment platforms, this will definitely provide a fillip to making India a fintech powerhouse.

Abheek Barua, Chief Economist, HDFC Bank

The 2022-23 budget finely balanced fiscal retreat with supporting economic recovery. The budget focussed on a familiar strategy of driving capital expenditure to drive growth, with the intention of crowding in private investment through higher public spending.

Although markets could be disappointed with a higher fiscal deficit of 6.4% of GDP for FY23 than expected, it is perhaps prudent to not undertake aggressive fiscal consolidation at this nascent stage of recovery. While elevated market borrowings are likely to pressurize bond yields, the inclusion of green bonds in the borrowing plan is an interesting innovation.

In terms of specific policy announcements, the move towards self-reliance through protection for domestic manufacturers (change in custom and import duties) aligns with the long-term goal of Atmanirbhar Bharat. Moreover, there is an effort to weave in short-term capital spending with the long-term 25-year investment plan for India.

Specific moves on education and mental health issues are critical and well-recognized in the budget. Lastly, Central Bank Digital Currency is likely to have an impact on banks, but the implications of the same will have to be thought through further.

Akash Sinha, CEO and Co-founder, Cashfree Payments

Budget 2022 is a reflection of consumers' trust in the digital-first approach to banking & finance. Economic Survey 2022 highlighted that UPI is currently the single most extensive retail payment system by volume, reiterating its wide acceptance.

This has contributed immensely towards driving digital transformation in the country.

The idea of setting up digital banking units in multiple districts will help in the homogenization of the financial services in rural and semi-urban geographies.

Akash Sinha

The launch of digital currency by RBI is both encouraging and critical in empowering the digital native youth to take a transformational leap from the conventional currency tools. We have witnessed an increasing use of blockchain technology to simplify and secure the consumer’s journey, and this push was required to encourage innovation in this domain.

Fintechs and startups must help stakeholders establish connections with remote locations and provide value-added services to the underserved and unbanked segments.

Harshil Mathur, CEO and Co-founder, Razorpay

The government’s aim to push India towards 100 percent financial inclusion and enhance India’s status as a digital economy is evident in Budget 2022. A strong focus on financial inclusion by setting up 75 digital banking units in 75 districts and their plan to connect 1.5 lakh post offices to the core banking systems reiterates this.

The introduction of CBDC will also be a step towards boosting India’s digital economy owing to its world-class digital payments system.

Budget 2022  finally focused on digital currency with the introduction of the digital rupee using blockchain technology in 2023 which I believe will help in reducing financial and physical efforts required for money management. 

Harshil Mathur

To bolster the startup and fintech ecosystem, we welcome the government’s decision to establish thematic funds to promote and encourage sunrise sectors in India.

With the introduction of thematic funds, where the share of the government would be limited to 20 percent, the Government of India has established a constant flow of capital for the sector, enabling it to innovate and grow, while at the same time generating wealth for investors.

Kavitha Subramanian, Co-founder, Upstox

The Hon'ble Finance Minister has presented a digital-first Budget that focuses on quick, holistic, and inclusive economic growth. The introduction of 5G and the spread of optical fibre to villages would provide a boost to the Fintech industry.

The focus on startups and fintech in this year's Budget is a fantastic step that will help these sectors grow further.

Kavitha Subramanian

The capping of surcharge at 15 percent on Long-Term Capital Gains (LTCG) tax for all listed and unlisted corporations responds to a long-standing demand for new-age businesses.

Ketan Patel, CEO, Mswipe

Measures to boost skill development through public-private partnerships, and by incentivising courses on fintech through world-class education institutions will definitely 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 brings 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, HRtech, 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.

Priti Rathi Gupta, Founder, LXME

As the union government hinted earlier to bring cryptocurrencies under the tax net, the government has imposed a 30 percent tax rate on the transfer of virtual digital assets, regardless of the holding period. 

There would be no tax relief available to offset the loss of the virtual digital asset against any other income. Gift of cryptocurrencies to be taxed at receiver's end. Now, the gains from virtual digital assets like cryptocurrency will be reported by the taxpayers as this announcement gives them a sense of clarity from the government.

FM announces central bank digital currency, which will be a digital rupee using blockchain and other technologies. It will be issued by the RBI in 2022-23. With an increased digitalization in the country, this move by the government can act as fuel to the country’s growth by making the systems more transparent and efficient.

In fact, the government has proposed to set up 75 digital banking units in 75 different districts by Scheduled commercial banks which will enable users to actively participate in banking transactions.

A new provision to allow taxpayers to file an updated return has been announced. Updated returns can be filed within 2 years from the end of the relevant assessment year in case they miss to report any income when the returns were being filed. This will provide convenience to the taxpayer.

Dilip Modi, Founder, Spice Money

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 hoping to see a much higher traction this year that will address the current challenges faced by the citizens and create a #AtmaNirbharBharat.

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 nanopreneurs.

Anurag Sinha, Co-founder & CEO, OneScore & OneCard

Considering we have not yet emerged out of the shadows of the pandemic; I believe the Finance Minister has done an excellent job in striking a fine balance in being fiscally prudent and growth supportive.

The budget has laid out a host of top-notch measures offering a huge push for infrastructure besides incentivising manufacturing and addressing key growth driving cohorts such as MSMEs, youth and even the startup community.

The budget has laid considerable focus on public investment and capital expenditure; however, on the other side it is quite conservative in its tax growth estimates. The budget however, contains several significant reform measures and fiscal initiatives that will boost social and economic development."

Amit Nigam, COO & Executive Director, BANKIT

FinTech industry is an ever-growing sector of the society. As per one of the ideologies of budget 2022 “Aatma Nirbhar Bharat Ka Budget”, the FinTech industry also strives to make everyone self-reliant. According to the budget 2022-2023, India’s growth is expected to grow by 9.27% including high-yielding opportunities for start-ups.

As digital payments have grown at rapid pace, the benefits of digital banking should reach every nook and corner. So, 75 digital banking units will be set up in 75 districts by scheduled commercial banks that will be like icing on the cake. Focus on the usage of Digital Payment Apps will also be enhanced from our end.

All the 1.5 lakh post offices in India will be connected to the core banking system that will enable people to access their accounts online and transfer money within post office accounts and to other banks also. As tax incentives for start-ups to be incorporated until March 31, 2023, Union Budget sounds favorable for FinTech start-ups.

Next phase of “Ease of Doing Business, Ease of Living” is also ready to be launched. Hence, we are looking forward to making the best use of new technological and advantageous opportunities designated by the Union Budget 2022-2023."

Lizzie Chapman, CEO & Co-founder, ZestMoney

The Union Budget- 2022 presented by Union Finance Minister Nirmala Sitharaman reaffirms that the Government of India is betting heavily on Digital India and sends a strong message that India is ahead of the world in adopting technology.

From continuing incentives for start-ups to thrust to digital payments via financial support to leveraging blockchain technology for a new ‘Digital Rupee’, the budget is an emphatic acknowledgment that fostering fintech innovations and digital banking is the only way forward for financial inclusion.

Ashish Jain - Member at FACE and CFO at LoanTap

The budget is progressive and addresses all the major expectations from various sectors including Fintechs, EVs, MSMEs, startups, etc. Allowing an extension of tax incentive by another year will hugely benefit the newly started ventures and will motivate the players to contribute to the macro-economic growth.

The FM has suggested setting up an expert committee to monitor mobilization of funds to start-ups through VCs and Private equities which is a major welcome step. The introduction of central bank digital currency will further boost the digital economy and will hugely benefit the Fintech ecosystem. With the setting up of 75 digital banking units in the next two years India is set to become a robust digital economy.

Ram Shriram, Founder, BharatATM

"In the run-up to the Budget this year, one of the most popular demands by the startup ecosystem was the extension of the tax holiday, this is important to show the government's commitment to building a robust startup economy and ecosystem. This is immensely important keeping the number of new start-ups registered in 2021. This is going to be a boost for young startups in the country.

The country now has over 61,400 startups recognized with almost 75% of districts having at least one startup each.Also, the Digital rupee to be issued using blockchain and other technologies and will be issued by RBI starting 2022-23.

This will give a big boost to the economy. This budget has eliminated the ambiguity of cryptocurrency legislation by bringing out the policy on digital assets tax of 30%, this is obviously a positive move that has brought little confidence in the crypto investors in India, yet the tax bracket of 30% looks higher as compared to the other countries."

Kumar Gaurav, Founder & CEO, Cashaa

"The industry was waiting for the government to recognize crypto technology and innovation.

Today, it is the beginning of a revolution when the government has itself announced the launch of digital cryptocurrencies.

Kumar Gaurav

We, as an industry, have taken a step ahead towards adoption of digital currencies. Yes, currently taxation imposed is a little on the higher side, but the industry which was already growing rapidly in the absence of regulation, will now thrive with the government’s clear support.

Rajan Bajaj, Founder and CEO, slice 

The government's increasing focus on deepening digital banking is encouraging. Backing all of these efforts with a world-class fintech hub that the Government has proposed to set up will transform the way financial services are delivered.

Setting up Digital Banking Units across districts and creating access to digital banking is a step in the right direction towards achieving our financial inclusion goals while we wait for more clarity on the precise definition of DBUs.

Rajan Bajaj

Zafar Imam, CEO, FinShell

In order to promote digital footprints We appreciate the intiatives announced in the budget by the honorable FM. 75 digital banking units by scheduled commercial bank in different districts will enhance banking penetration to the last mile.

E passports using embedded chips, futuristic technology is another digital intiative which Govt plans to complete by 2023. Allocation of 48000 cr to PMAY scheme to complete 80 lakh homes will boost affordable housing sector. Govt also proposed to expand E vidya to 400 channels and establish digital universities.

Credit linked guarantee scheme extended till March 2023 will support the MSME sector during these pandemic time. Overall seems to be a futuristic budget where a lot of thrust is given to more digital expansion and to promote start ups and fintech.

Shams Tabrej, Founder and CEO, Ezeepay

Witnessing the digitalization in India, we think it is a sound decision by Finance Minister to work towards a digital ecosystem. The plan of this fiscal year hints towards encouraging digital courses by setting up more Digital Universities and making people more digitally educated. Also, the inclusion of digital banks in rural areas, bank ATMs in post offices, and digital payments will help make banking in rural areas better.

This year, the government has shown promising improvement in rural banking and tech literacy. This would lead to a better banking experience in rural areas and make the country's digital come true.

Furthermore, the government plans to set up a fintech hub at Gandhinagar Gujarat International Finance Tec-City (GIFT) International Financial Services Centre (IFSC) — popularly known as the GIFT City — to offer a platform for fintech startups to expand globally. With all these initiatives, we can improve the banking experience for our customers.

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.

Also Read:

• How Indian Startup Ecosystem responded to the Union Budget 2022

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