2018 Budget: An opportunity to promote paperless, digitised finance

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Adhil Shetty, CEO and Co-founder, BankBazaar.com
Adhil Shetty, CEO and Co-founder, BankBazaar.com

2017 was an impactful year due to both the rollout of the GST and the after effects of demonetisation. In fact, recently the government lowered its gross domestic growth (GDP) forecast for the year ending March, 2018 to 6.5 per cent, the weakest pace in four years, mainly owing to the above two policy rollouts.

But 2018 onwards things are expected to fall in place as the benefits of these schemes will start to show effect. The International Monetary Fund (IMF) has already signalled positive signs by pegging India’s growth to pick up to 7.4% in 2018 as against China’s 6.6%, as the twin effects from the tax reform and demonetisation wear off.

Come Budget 2018-19, the government too is expected to present the best cards it has to offer, as it’s the final full year budget before the general election. But given the reality of fiscal expansion, the government’s scope to increase revenues is limited because the power to levy indirect taxes, which make up about half of total tax collections.

The FM’s control over direct taxes that cover personal and corporate taxes, could be the concessionary line for both taxpayers and smaller businesses. Amidst this, the government will be looking to further promote its drive to invest in non-traditional assets, hopefully by giving not only more tax exemptions to investors but also easing physical approvals for financial products.

Fostering Paperless Finance

A cashless economy is not an impractical proposition anymore, thanks to the phenomenal rate at which digital payments have picked up in the country. But why should it be restricted to just payments and retail transactions? Digital mobility in finance needs to spread across avenues where it matters the most, such as investments, credit borrowing and social security schemes. Whether it be a life insurance scheme, a car loan or a moderate-risk mutual fund, investors and borrowers should not have to run from pillar to post to attain physical approvals, when most of it can be done online.

Sure, there may be reservations, but once upon a time it was almost impossible to think that large sums of money could be transferred in real-time across banks, and across continents. Thanks to technologies like IMPS, NEFT, RTGS and more that central banking solutions (CBS) seem just like a part of our everyday lives.

Taking this a step further with the growing smartphone penetration across the nation and Aadhaar, the digital bridge to reach customers will no longer seem unrealistic for non-traditional assets, and both borrowers and investors may no longer need to physically visit banks and NBFCs.

How Can This Be Achieved?

The aim of such paperless finance should be to give access to and complete the purchase of financial products, right from origination through the sale without having any physical touchpoints. This will include everything, from electronic distribution and sharing of documents between the lender/service provider and all parties to the legal compliance and transfer of electronically signed documents.

Paperless processes will not only help to efficiently manage the cost of communication but also control the communication, including preventing alterations in the information. It will also ensure there is a proper documented history of all the communication.

Building on platforms likee-KYC and e-Sign, accompanied with existing modes of cashless finance (such as UPI), can someday make it possible to open new accounts without stepping into a branch or even meeting a representative of the financial institution. Along with reduction in costs for boarding customers, paperless finance through the internet will reduce last-mile difficulties posed by wet signatures and absence of branch offices and ATMs. Ultimately the cost savings—2-3 per cent for banking products, and 20-30% for insurance products – can be passed on to customers.

The most important reform in this sphere has already been implemented by the government, with Aadhaar and its linkage to all financial and social schemes. But this needs to go hand in hand with other platforms as e-Sign, DigiLocker, and e-NACH. While e-KYC has already been adopted by most stakeholders, e-Sign still needs to be adopted by most parties, for which effective changes are also required in the IT Act.

DigiLocker is a relatively new concept, where 1 GB of storage space is offered to users by the government to store identification card issued by government agencies, education certificates, PAN cards, driving license, vehicle ownership documents and some other documents. The concept is a much need one for remote areas, as it can get tedious to carry around the same set of documents from point to point in anticipation of loan approvals.

As for e-NACH, although smaller amounts can be disbursed digitally, the approval of an insurance or loan disbursal process still requires wet signatures. Giving mandates in future can be made completely paperless with the introduction of either e-signed mandates or an e-mandate revocable only with the consent of the lender.

Although the budget may not be the platform to give a go ahead to all of these paperless aimed platforms as most will require RBI’s nods as well, it will be the ultimate platform to send out a larger message on where the government stands in supporting an all-inclusive digital economy, where e-finance leads the way. Just like schemes like EPFO and its daily dealings are completely digitised, the government is expected to introduce this paperless efficiency to more such avenues, with insurance expected to be the early beneficiary. Lending may take some more time, as both the RBI and banks will need sit together to chalk out a full-proof path in order to prevent NPA’s from rising, but at the same time let the case for paperless lending foster.

Digital mobility in finance is the need of the hour for the economy, and giving the much needed fillip to paperless and touch less financial products is probably the only way to go about it.

The writer is Adhil Shetty,CEO, BankBazaar.com, a leading online marketplace in India that helps consumers compare and apply for credit card, personal loan, home loan, car loan, and insurance.

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