Budget 2022 expectations: As Union Finance Minister Nirmala Sitharaman will be presenting her third budget on February 1, 2022, Elets Technomedia interacted with leading NBFCs and Fintechs to understand what are their expectations from the key announcement.
Shachindra Nath, Executive Chairman and Managing Director, U GRO Capital
Union Budget 2022-23 is highly crucial to align Indian economy’s growth trajectory. It is essential that the Hon’ble Finance Minister announces effective measures to enable speedy recovery and growth of the MSMEs, considering the sector’s significant contribution to the economy. It is encouraging to see Government’s support for the MSME sector in last 12-15 months and we believe the efforts will only become more prominent in the time to come.
In past few years, operationally nimble and technologically oriented NBFCs and Fintechs have deepened the credit penetration to the underserved regions of the country. Hence, in the upcoming budget, policymakers should provide due consideration to boost liquidity support to the NBFCs as well as encourage frameworks like co-lending, which will greatly boost the reach of financial institutions and progress in the financial inclusion imperative. EASE 4.0 talks about Co – Lending between Banks and NBFC as a means to increase the credit penetration, however the treatment of Tax Deduction at Source (TDS) treatment for NBFC and Banks are different and that is proving to be a major operational challenge to accelerate credit. It is expected that TDS rules would be harmonised between Banks and NBFCs.
Mukund Rao, Co-founder, muvin
Neobanks are still a relatively new construct in India but will take on significant importance in the years to come. The support from the Government will certainly play a crucial role.
On the lending side in particular, the guidelines being envisaged by the RBI around digital lending will bring about some much needed transparency for consumers. The Niti Ayog recommendations on establishing a framework for Digital Banks will help neobanks to potentially transition from being pure technology and customer acquisition layer to a full fledged digital bank. This in turn will open up massive opportunities to offer very customized and tailored offerings to both retail and enterprise customers in the country.
KYC requirements can be further streamlined- clear guidance could be provided on Aadhar based KYCwith OTP. Furthermore, incentives should be provided for Video KYC as an on-boarding option. I believe that remote onboarding initiatives especially in the current pandemic situation would be key to further drive adoption of fintech platforms.
Neobanks are driving a high amount of financial inclusion and awareness especially amongst the underbanked segment in India. Public-private partnership programmes will further help to broaden reach and take these initiatives to the masses. Suitable grants and tax incentives can be provided to encourage such efforts that have an impact at a grassroots level.
The RBI had a strong financial literacy agenda in 2021 and this should continue into 2022 by partnering extensively with FinTechs. Ideally a working committee, with participation from Industry experts, fintech executives and banking executives, should be established at a central level with regional chapters to drive financial inclusion and awareness in a sustainable manner.
Winny Patro – CEO & Co-founder, Recordent
The MSMEs have been hugely impacted by the COVID-19 pandemic induced lockdowns in the past two years. The government announced the ECGLS scheme to provide support during the initial lockdown days. The expectation from the Union Budget 2022-23 will be to further provide support to these small & medium businesses through policies that drive reduction in interest rates on loans and enhance loan procurement process to help walk on the road to recovery and subsequent business growth. Also, revisting duties and taxes in sectors which can compete at international markets will lead to faster growth of MSMEs. Furthermore, to accelerate Atmanirbhar – Make-in-India and Made-for-India, government may re-visit and reduce duties and taxes on capital goods to encourage small enterprises and businesses to invest more and produce more.
Aditya Sharma, CEO, Affordplan
The pandemic has shown us what improvements are required and where. The government commendably raised spending on healthcare by 137% last year but the percentage of GDP spent on healthcare can still be increased significantly. This will be required to improve vaccine delivery as well as shore up critical healthcare infrastructure and public-private partnerships will prove key in this regard. Special attention should be paid to innovations that help households on the brink of poverty deal with their healthcare expenses, for both chronic as well as sudden or acute conditions. The recent Startup Day announcement is a positive first step for fintech and healthcare startups looking to provide ready solutions to these households.
Madhusudan Ekambaram, Co-Founder & CEO, KreditBee and Co-Founder, FACE (FintechAssociation for Consumer Empowerment)
The Union Budget 2022-23 is a crucial one, considering economy’s efforts to fully recover and set on a growth path. In this imperative, focus on financial inclusion is very significant. The Government’s recognition of the enhanced operations and effectiveness of fintechs to reach out to the unserved and underserved population, as evident from multiple initiatives in recent times, is encouraging. We expect this emphasis to become more prominent in the upcoming budget. It is essential that the Government announce measures to ease the liquidity flow to NBFCs and fintechs. Further, while ensuring the right degree of regulation, relaxation of norms and tax liberalization to some extent will allow the fintech sector to boost their reach and operate effectively to offer innovative credit solutions to the borrowers. Focus should also be on enhancing the country’s digitization bid, to empower the consumers to avail various credit products.
Vineet Tyagi, Global CTO, Biz2X
The pandemic that shook the entire world has brought immense innovation by startups and new-age technology companies and it is quite evident that the trend will only pick up in the year 2022 as well. In the spirit of tech innovation and digital transformation, we hope, through the union budget2022-23, the government will bring game-changing reforms, new policies, and regulations that will offer relief and tax sops to MSMEs and the overall startup ecosystem. With the pandemic providing the boost to digital payments, there is an increased need for revolutionary advancements of end-to-end infrastructural as fragmentary solutions may not sustain in the long run. In 2022, we expect that the government to focus more on the development of digital infrastructure to enhance customer experiences, credit quality, and streamline the growth of financial entities in FY22-23.
Vivek Banka, Founding Team, Goalteller
As the old adage goes “ No News is Good News” . As a startup founder, I think there are a lot of tailwinds that are existent in terms of ample liquidity, regulatory changes and broad based digital adoption. Other benefits have also been passed in over last many years for startups and small businesses and hence my expectations towards this years budget is status quo which in itself would bode well for everyone in the ecosystem. Whether it be personal taxes, corporate taxes or capital gain taxes the regime should be made easier and progressively lower as the government has themselves stated earlier.
Focus we believe should continue to remain on more transparency, greater compliance and finally easier rules of doing business ( whether it be relaxed norms or government portals working smoothly every single thing that helps empower startups with easier processes eventually helps us save time and money.
Aditya Damani, Founder, Credit Fair
The government needs to play a fine balancing act between spurring economic growth while consolidating its finances. We expect Credit Fair’s focus sectors of Healthcare, Housing and Education to get policy support from the government as they’re key to improve our social infrastructure as well as for job creation. The LIC IPO and other measures to raise revenues will be crucial for the government. We hope it’s a fiscally responsible budget since inflation has been rising and that could lead to higher interest rates which would be a headwind for fintechs. Subdued interest rates especially in Government bonds and Fixed deposits will be needed to spur capex, SMEs and fintech lending. As a creator of Alternative Assets we hope the Budgetwill nudge individuals to diversify their portfolio and enable pension funds to invest in a wider range of fixed income or equity assets that have been created by fintechs.
Sanjay Sharma, MD – Aye Finance
The repeated wave of covid pandemic has caused commerceto get into a stop start stop uncertainty. Micro and small enterprises are struggling as their buyers are fearful of spending their meagre savings. Over 95% of businesses in India are micro scale businesses and these have been an important driver of the growth of our economy. These can also become a big drag on the recovery if the situation does not change.
The situation fortunately can be reversed speedily. The consumer sentiment at the bottom of the pyramid population is sombre and the government cannot leave it to normal market dynamics to pull up the animal spirits. Government is doing some and has to do even more to break this inertia.
Firstly, we need to ensure that micro enterprises stay funded to survive. The Government should consider extending and expanding the ECLGS program for better part of the new FY. It is important that rates of interest in these schemes should not be capped so that lenders are encouraged to make these funds flow to the micro scale businesses where their operating costs are high. Capping the rate of interest diverts most of these funds to the bigger enterprises and thus starves the most needy micro businesses. Loan restructure program has been the life support for so many micro businesses that have been established by years of toil by the business owner. We are not yet out of the woods and the lenders should hence be allowed to extend the restructuring window by 6-12 more months, to enable these businesses to pull through this trough.
Secondly we need to jump start the demand. Improving the opportunities for employment especially in tier2 and tier3 towns has become vital after the huge migration of workers from the cities. Government should place fiscal discipline as a lower priority and open its purse strings to employment generation schemes. Expansion and speedy transfer of wages through MNREGA and increase of infrastructure building projects is something the Government is already doing. Some economists have suggested direct transfer of money in the hands of the families at the bottom of the pyramid. This is surely something that the Government should consider seriously. This can oil our commerce engine, lift the sentiments and get the demand back to normal times.
Anil Pinapala, CEO & Co-Founder of VivifiIndia Finance
In the upcoming union budget, I hope to see a strong mandate for financial inclusion and assistance from the GoI for start-ups attempting to bring in credit for all transcending language, literacy, location, livelihood like FlexPay. Relaxation in norms and assistance with liquidity to lending NBFC fintechs who are attempting to offer credit to the under-served and unserved would be a welcome move. I also hope that non-prime lending could be brought under priority sector so that NBFCs can truly work to bring credit to all.
Amitt Sharma, Founder & CEO, VDO.AI
COVID 19 has accelerated digital consumption and adoption, leading to a stack of new options for brands in the advertising space. With the change in digital usage and consumer demand, brands are now seen to be engaging with young consumers. They are fully automating and welcoming immersive experience for the users by adopting new AI technology. According to a survey on marketers’ strategies and difficulties, roughly 66% of marketers expect their budgets to increase in 2022, while 71% of Indian marketers expect their budgets to increase.
Both connected TV (CTV) and over-the-top (OTT) advertising are relatively new to the advertising world, but they are rapidly gaining in popularity as more people are abandoning traditional television in favor of digital streaming services. When compared to traditional TV ads, the total reach of OTT advertising is impossible to beat, as the on-demand content is far more intriguing. The exponential rise of these technologies is being accelerated by ongoing technological advancements. As per the reports by Mordor Intelligence, the over-the-top (OTT) market value is expected to reach USD 223.07 billion by 2026.
With marketers focused on KPIs that drive ROI and budget allocations made towards Digital India, we anticipate that digital advertising spending in India will continue to increase in FY 2023, where experimenting with new formats and advertising channels will become a priority.
Nandini Mansinghka, Co-founder & CEO, Mumbai Angels Network
In the last few years, the government has launched multiple policies and schemes for the welfare and growth of the startupcommunity. With young entrepreneurs entering this ecosystem at a steady pace, we hope that resources, funds and capital provided by the government are easy to access. We further expect from the government to create an easy regulatory system, policies, and norms for startups so that organisations can run business without any administrative obstacles.
Ketan Gaikwad, CEO and MD of RXIL
Budget 2021 was a huge hit with the MSME eco-system as it extended a helping hand to even the weakest link in the chain. However, the problems for MSMEs, who have been working hard to get things back on track, do not appear to be going away. While everyone is still guessing about how contagious the new variant of Covid-19 will be, there is a tangible sense of anxiety among small firms. Yet, many in the MSME sector are optimistic about the 2022 budget, especially because the government has been responsive and supportive throughout the pandemic.
While recuperating from two Covid wave disruptions and multiple lockdowns, MSMEs are hoping for two key reliefs at this time: GST rationalization and a reduction in compliance burden. For a continued sentiment of Atmanirbhar Bharat- #MakeinIndia, it is important to ensure development in infrastructure and labor skills which are essential for a healthy economic growth. Timely financing for SMEs through government platforms like TReDS is the need of the hour as it promotes sustainable financing. Not only that, PSUs that have registered must also be motivated to transact on the platform. Budget 2022 will prove to be a true success if it is successful in accelerating demand generation, job creation, and long-term economic recovery.
Arun Poojari, Co-founder, Cashinvoice
I’d like for the Budget to create a more enabling environment for fintechs, specifically the ones operating in the MSME financing space. One such enabler could be if fintechs are allowed to participate in CGTMSE scheme to assist these small firms who are suffering as a result of the pandemic. This will provide them with more access to longer-term, interest-free loans.
In India’s economic growth history, MSMEs have been one of the most powerful generators of growth, entrepreneurship, and employment. But the onset of the pandemic left most cash-starved and vulnerable despite dedicated efforts from the government in the form of credit guarantee schemes, moratoriums and many other regulations. Fintech came to the rescue by making the lending procedure for small and medium businesses accessible and hassle-free thanks to technology-driven solutions. Thus, a growth-friendly environment is crucial at this point to support these MSME financing fintechs as they eliminate market inefficiencies with the use of technology. Online lending/credit underwriting systems, supply chain financing platforms (SCF), and embedded finance solutions are a few popular options amongst MSMEs.
Muralidharan Srinivasan, Head of Payments, APMEA Region, FIS
We expect the Union Budget 2022 to further layout concrete measure for expanding digital infrastructure in the country that will lead to speedy transactions, and will encourage Fintech companies to create new digital offerings for people. In order to achieve greater financial inclusion, tax incentives to merchants/ companies who are empowering people with digital onboarding and payments in Tier II / III cities and rural India can be offered which can be a key driver. We expect significant policies to be announced that may lead to increase in large-scale penetration of credit instruments in Tier II / III cities and rural India, and spur demand in the economy. We firmly believe that substantial improvement in digital infrastructure and advanced payment technology will eventually help in building a cash-free economy.
Puneet Maheshwari, Director, Upstox
In the past year, digital brokerages offered investors easy and convenient access to a range of products and services. In a welcome development, SEBI announced a shorter settlement cycle, called T+1, as an incentive to the investor community.
Government may consider relieving traders of the securities transaction tax (STT). By doing so, new investors would be encouraged to start trading. There needs to be more participation in indexes or exchange-traded funds. By offering a lock-in and tax incentives on the lines of equity-linked tax savings schemes, the government can encourage long-term savings in Nifty or Sensex. A greater allocation by the government-owned provident funds and pension funds into equity markets could also help.
Given the enormous increase in medical expenses due to Covid-19, we urge the government to hike the standard deduction from the current ₹50,000 to ₹1,00,000. This will further lower the tax burden and put more money in the hands of the salaried class. The government should remove the concept of speculative income and restrict income classification arising from capital market transactions to business income, long-term capital gains and short-term capital gains. We hope that the Government considers tax exemption up to ₹1,00,000 lakh on short-term capital gains tax as well as tax exemption on dividends up to ₹50,000 for senior citizens.
The 2022 budget 2022 should help build momentum in the equity markets and every possible avenue must be considered by the government to make this happen.
Hi Rashi, wanted to request if the below quotes can also be added to this story:
Akash Sinha, Co-Founder & CEO, Cashfree Payments
The upcoming Union Budget holds high significance, as the Indian economy takes strides towards its complete recovery and growth post the pandemic. This imperative will be greatly supported by enhanced financial inclusion and digitalization which makes it crucial that appropriate measures are announced in this regard. It is heartening to see the Government’s recognition of fintechs’ ability to reach out to the unserved and underserved sections of the country, as evident from multiple initiatives in recent times. To further scale financial inclusion, it is essential that the government’s support is directed towards boosting digital infrastructure and innovation. Additionally, policy and regulatory efforts should be aimed at creating a favorable investment environment. While ensuring an appropriate degree of regulation, easing the investments in unlisted private businesses, especially in non-metro cities is crucial for convenient capital flow to technology start-ups towards their healthy growth. In the same respect, reducing the entry limits for Alternative Investment Funds (AIFs) and syndicates, aligning with the Government’s allocation to priority sectors, will ensure fund infusion to businesses.
Jaya Vaidhyanathan, CEO, BCT Digital
As far as Union Budget 2022-23 is concerned, expectations are at an all-time high. The good news is that despite the obvious pandemic-induced impediments, economic recovery and expansion are still on track, and we seem to be moving closer to the US$5 trillion target. This is in no small part due to the recovery measures taken by the Government of India since 2016. Positive indicators in the stock market could also be interpreted as signs of progress. In addition, December 2021 saw robust GST collections of Rs.1.3 lakh crores, indicative of an era of monthly figures consistently above the Rs.1 lakh-crore-mark. On the flip side, persistent and high inflation in retail and wholesale leaves the economy in a precarious position.
For consumers and salaried employees, simple tax-related exemptions and benefits would be welcoming this year. On the business side, reduction in duties, concessions, simplified compliance measures, investment incentives, and state-sponsored programs to boost manufacturing, are all desirable steps to keep up the momentum of growth. It is also most critical to acknowledge the role of fintech in the future of economics. The expectation is for the government to reward and sustain fintech intervention to bolster India’s position as a global growth leader.