Budget 2024: What fintech industry expects from FM’s budget

The fintech industry has been one of the top-performing sectors in the past decade, and India has solidified its position as the world's third-largest and one of the most swiftly progressing fintech markets. Finance Minister Nirmala Sitharaman, in her Interim Budget 2024-25 speech on February 1, 2024, is expected to make crucial announcements to boost financial inclusion, especially in Tier 2 and 3 cities.

In its well-defined wish list for the Interim Budget 2024, the fintech industry, which operates in the areas of technology and finance, thinks it’s time for the Centre to encourage the industry to aim higher, and for that, it’s important to handhold smaller players. The industry demands smaller companies be exempted from GST filing, which will reduce the tax burden and costs on them.

"The whole idea of fintech is to make financial services available to the last mile and exempting them from GST up to a threshold will help hold costs at a lower rate. In addition, the budget should also explore the idea of GST subsidy for fintech and financial infrastructure companies that are specifically catering to Tier II, III, and IV towns. These outfits play a big role in financial inclusion, after all," IIFL Securities' India Infoline writes in Budget expectations for the fintech industry.

Bipin Preet Singh, co-founder and CEO at MobiKwik, a leading digital banking platform, says in 2024, the industry expects the upcoming Interim Budget to further drive financial inclusion by increasing the credit corpus for MSMEs.

“This involves extending support to microfinance institutions (MFIs) and small finance banks (SFBs), that help them meet their financing needs. To reach enterprises in remote corners of the country, we foresee incentives for fintechs that provide lending solutions beyond Tier 2 & 3 cities,” says Singh.

Also, he thinks a “greater alignment” between fintech companies and public institutions is crucial for the evolution of India's fintech ecosystem. “Financial products built on top of India Stack have borne strong results in the world of digital payments. We expect the budget to provide incentives that encourage fintechs to drive further innovations for other aspects of banking like credit, investments, savings and advisory.”

The incentive for growth in rural segments is one more demand of the fintech industry. Due to a lack of adequate infrastructure, there are still many areas untouched by the digital payments revolution. "Many leaders in the fintech sector want the government to announce incentives to promote the growth of digital payment infrastructure in underserved and unserved areas," Fibe, a consumer lending platform focused on young working professionals, says in its Budget expectations report, adding that it will "even drive further financial inclusion and bring the rural segment into the financial mainstream".

Axis Securities' Niraj Chadawar writes in its “2024-25 pre-budget expectations” report that the budget is expected to concentrate on fortifying the regulatory framework for the fintech industry in India, recognising its pivotal role. Concerning digital lending platforms, a significant expectation is the augmentation of loan-to-value rations on specific schemes. "Despite robust growth, LTSs have remained unchanged." "Reinforcing digital infrastructure while prioritising consumer security may be a key focus area."

Rahul Mehrotra, managing director and chief executive officer, Religare Housing Development Finance Corporation, says the Centre this time is expected to have a “comprehensive reform” in capital gains tax, signalling a commitment to optimising fiscal policies.

Sarvjeet Virk, co-founder & MD, Finvasia, says he anticipates a continued focus on advancing India's digital public infrastructure, a key pillar for realising the $5 trillion economy dream. "I look forward to enhanced government initiatives fostering financial inclusion benefiting Bharat, not just India. On the tech front, I hope to see further progress in establishing AI Centres of Excellence."

Notably, from ₹2,017 crore in 2017-18, the volume of digital payments has recorded a CAGR of 45% to ₹13,462 crore in FY23. In the previous two budgets, the Centre had allotted a financial outlay of ₹1,500 crore as support for the digital payment ecosystem in India. The Indian fintech ecosystem is expected to grow more than 35% annually to clock over $190 billion in revenue by 2030. A recent by Matrix Partners India and Boston Consulting Group (BCG) had revealed that the fintech profitability outlook improved significantly from 20-30% in 2022 to 40-60% in 2023.