Budget 2022: Fintech, NBFCs seek relaxations in tax norms, liquidity assistance 

Relaxations in tax norms for fintechs

The industry expects government’s support towards the tech driven startups to create a sustainable fintech ecosystem, considering the Covid pandemic helped in greater push towards digital solutions. Terming the Covid wave ‘Chief Formulation Officer’ for the fintech sector, Pallavi Shrivastava, Co-founder and Director, Progcap said, “as a lookout to budget 2022 we expect a strong mandate towards the lending NBFC’s which are working towards empowering the under-served SMBs through financial and technology interventions. Also, we expect a few relaxations in tax norms and liquidity assistance to NBFC Fintechs.” 

“We also wish that the budget caters to encouraging women entrepreneurs by offering benefits in tax deduction, easy accessibility of resources & funds among others,” Shrivastava said

Low-cost funding for retail NBFCs

NBFCs have sought for a greater focus towards the underbanked MSMEs and small entrepreneurs in a bid to ease lending for them. Sanjeev Srivastava, Chief Risk Officer, IIFL Finance said, “we expect the PMAY – Housing for all scheme to continue for all rural and urban areas with higher benefits for affordable home buyers, which in turn will boost the economy.” 

NBFCs further expect a more conducive compliance framework for themselves to provide credit to unbanked and underbanked MSMEs and small entrepreneurs and bring them into the formal lending system. “More liberalized and low-cost funding for retail NBFCs is also the need of the hour,” Srivastava said.

Measures to ease the liquidity flow to NBFCs, fintechs

The Union Budget 2022 comes at a crucial moment, as the country is reeling under the pressure from rising concerns around the Covid pandemic. Hence, considering economy’s efforts to fully recover and set on a growth path, the government’s recognition of the enhanced operations and effectiveness of fintechs to reach out to the unserved and underserved population has encouraged the industry.

Madhusudan Ekambaram, Co-Founder and CEO, KreditBee and Co-Founder, FACE (Fintech Association for Consumer Empowerment) said, “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,” Ekambaram said.

GST, TDS relaxation 

As the pandemic-hit period impacted all businesses, fintech startups have expectations from the budget in order to push forward economic recovery. As the growth seen by the fintech and startup industry in the last year has pushed the need towards sustaining the growth and protecting customer confidence, Ram Shriram, founder, BharatATM has said, “exemptions on procurement of point of sale terminals, GST rates for rural banking agents remitting funds among households, and subsidies to compensate for merchant discount rate (MDR) waiver are among some of the measures industry executives are keeping an eye out for.” 

The growth in the digital payments sector and its adoption is the result of gentle taxation for self-serviced digital customers and to to ensure that the same benefits reach the less tech-savvy citizens, our government should look at GST and TDS relaxation for the financial inclusion services offered through the Business Correspondent (BC) outlets across India, Shriram said. 

“Waver of the GST and TDS will help the industry to reduce the cost of offering seamless financial services,” he said.

To promote startups that have achieved a remarkable feat over the pandemic-hit period, Shriram said, “in this budget, we also expect the government to possibly extend the ambit of the Start-up India Seed Fund Scheme. Growth-oriented startups with proven capabilities could be aided with financial assistance for R&D, prototype development, and product or services trials.”

Greater focus on rural development and MSMEs

In order to revive the financial sector post Covid pandemic, industry experts feel the upcoming budget should focus on reviving the financial sector by focusing on rural development and MSMEs to increase livelihood opportunities and provide safety nets. To boost MSME lending, YS Chakravarti, MD and CEO of Shriram City Union Finance, said, “we expect harmonization of regulations for NBFCs and Banks, specifically on tax and recovery measures. Deposit-taking NBFCs should be empowered to offer guarantees similar to banks under DICGC that will strengthen their liability pipeline.”

“Retail loans to individuals and small businesses need to be treated differently compared to large corporate loans. There is a need for an effective refinance mechanism (similar to NHB refinance) to ensure liquidity and easier access to finance. Push for environmentally friendly policies like the EV subsidy program – FAME (Faster Adoption and Manufacturing of Electric Vehicle) to help tackle climate change will go a long way in benefitting the ecosystem,” Chakravarti added.