What are the budget expectations from a fintech lender’s perspective?

The number of fintech lenders in the market has seen a meteoric rise in the last two years or so. Recognising the immense potential that these lenders hold in furthering financial inclusion and credit penetration, and consequently evolving prudent policy to benefit the sector should be one of the key areas of focus for the government.

The recent Aadhaar verdict that doesn’t mandate consumers to furnish Aadhaar information sent a few shocks across the fintech industry. The judgement disallows any lender to compel customers to share Aadhaar information for the purpose of KYC verification and authentication. Fintech companies that deal with online lending relied heavily on Aadhaar information to pursue e-KYC verification. The recent Aadhaar directive has forced lenders to backtrack and revisit the idea of physical verification that only serve to raise operating costs. More so, evolving a new framework that eliminates Aadhaar as the centric element and focusing on other means to pursue verification is a burdening, time-consuming and costly affair.

As lending companies had initially spent considerably on building business models around the Aadhaar, looking for other options has already become an expensive and time-consuming affair. Directing funds to help resolve this problem to enable easier and more accurate consumer verification models that revolve around digital data collection and processing will help benefit the sector tremendously.

The government, in its last budget, had earmarked significant amount of funds to further technological advancement across industry segments. Continuing to make budgetary allocations to improve adoption of AI, Blockchain, Robotics, Digital Manufacturing and Big-Data technologies by fintech lenders (and other segments of the market covering industry and services) is certainly a welcome move.

Providing tax benefits by prolonging the tax-holiday period and reducing regulatory influence on the sector (striking down section 57 of the Aadhaar Act for instance) is an important area that should be given credence.

Faster license approvals and clearances are also necessary, not just from the perspective of fintech lenders but startups as a whole.

Creating an enabling environment for digital information to be stored and shared without privacy breaches and data leaks to ensure easier and quicker access of information can greatly improve the pace of credit penetration – a crucial area where fintechs have played a note-worthy role.

Reducing the rate of income tax for employees of early-stage startups can also be an impressive move in lending confidence to the sector.

Reducing the rate of Angel Tax that still looms large and threatens investor confidence deters and fund-raining will help raise funds more easily. There has been news about startups possibly being given exemptions from Angel Tax – we should wait and see how far this goes.

Bringing down the Minimum Alternate Tax and allowing loss carry-forwards are also areas that need to be addressed in the budget.