India’s fintech sector has emerged as a cornerstone in the nation’s economic framework and is expected to contribute an additional $400 billion to the national economy in the next seven years. A standout on the global fintech stage, India’s fintech landscape been a force in bringing financial services to the masses who were left out before.
Previous years’ budget announcements have focused on bolstering the backbone of the economy—agriculture and MSMEs (Micro, Small and Medium Enterprises). In line with the emphasis on socio-economic empowerment, all eyes are on the policies that will enable access to financial solutions across the length and breadth of the country. As we gear up for this year’s Union Budget, we’re keen to see how it will give the fintech industry what it needs to keep innovating. It’s not just about the money; it’s about creating an environment that nurtures continuous progress in this ever-evolving financial landscape.
This year, we expect a special focus on meeting the needs of MSMEs, emphasising a smoother flow of credit. This would involve incentives for the creditors themselves through extended support to microfinance institutions (MFIs) and small finance banks (SFBs). To reach enterprises in remote corners of the country, we also foresee support to digital lending players that offer credit to merchants beyond Tier-II and III cities. This expansion is crucial in leveraging fintech’s potential to boost the MSME sector, ensuring these businesses have the resources and support they need to thrive in a competitive market.
A recent CAFRAL report predicts that fintech lending will surpass traditional bank lending by 2030. For this to be possible, digital lending solutions must be rolled out beyond the metros, reaching small businesses and consumers in Tier-III cities and beyond. The anticipated impact of the Open Credit Enablement Network (OCEN) is poised to establish stronger credit flow to merchants across remote parts of the country.
Responding to the anticipated growth of digital lending, especially for small ticket-size loans, we expect more checks and balances to protect borrowers. Regulatory developments like the forthcoming fintech SRO and cloud repository signal a potential commitment toward fostering a responsible and safe fintech ecosystem.
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In the previous year’s Union Budget, the government allocated Rs1500 crores in incentives to fintechs and banks. Capital is welcome, but it is not a constraint for the BFSI space in India, being one of the most capitalised sectors in the country. Beyond capital infusion, we expect incentives for the ecosystem to encourage partnerships between fintech players, public institutions, banks, and NBFCs.