Impact Of The Union Budget 2021 On The Fintech Sector
Nirmala Sitharaman, the Union Minister for Finance & Corporate Affairs, presented the Union Budget 2021-22 in the Parliament on Monday, which was the first budget of this new decade and also a digital one in the backdrop of the unprecedented COVID-19 crisis. The budget focussed on health & hygiene, education and opened up opportunities for startups.
Reacting to the budget, Padmaja Ruparel, Founding Partner of IAN Fund said, “The Budget 2021 opens up opportunities for startups across Health, Hygiene, Water, Clean air, Sanitation, etc. The vision of Atma Nirbhar Bharat with a focus on Good governance and Women Empowerment will lead to a boost for the Indian Economy. The Indian Startups have a great opportunity to innovate and help to sustain the Indian Economy. Non-conventional energy boosted with focus on solar and Non-renewable sources.”
The Union Budget 2021 contained several incentives for the fintech industry, which witnessed exponential growth during the previous year in areas inclusive of digital payments, retail investments via online brokerage platforms, insurance buying and digital banking amongst many others.
Some of the incentives announced in the budget included :
1. A Rs 1,500 crore scheme to develop, promote, and accelerate digital payments in the country. "To give a further boost to digital transactions, I earmark Rs 1,500 crore for a proposed scheme that will provide financial incentive to promote digital mode of payment," she said, presenting Union Budget for the 2021-2022 year.
2. A 'world-class' fintech hub at GIFT City (Gujarat International Finance Tec-City) aimed at encouraging and developing innovative financial technology services and products. While presenting the Union Budget 2021-22 in the Parliament on Monday, Nirmala Sitharaman conveyed that the aim with this move is to “aid the development of a world-class fintech hub” in Gujarat.
3. Setting up of development financial institutions (DFI ) with an outlay of Rs 20,000 crore in a bid to boost loan access for businesses SME’s and MSMEs working in areas of manufacturing and infrastructure. A development finance institution is an institution that is often established and owned by governments or charitable organisations to provide funds for low-capital projects when borrowers are unable manage them from commercial lenders.
4. Increasing the foreign direct investment (FDI) limit in insurance to 74 percent from 49 percent.
5. Increase in limit for a tax audit, Rs 5 crore turnover initially, to Rs 10 crore.
Analysing the impact of the budget in the fintech sector, Ankur Gupta, Founder and CEO, Ruptok Fintech Private Limited, a fintech platform for gold loans, said, “The reduction in import taxes on gold and silver will accelerate the demand and purchase of the respective metals. It will also help in boosting the new wave of lending business in India, especially firms like us who provide loans on gold. In terms of tax holidays and capital gains exemption, it will help the newly emerged startups or businesses that have faced challenges due to the pandemic. Furthermore, the proposed facilitation of a world-class fintech hub at GIFT city may help in changing the sentiment of the average consumer towards fintech.”
As a country with the second-largest population of internet users, India has been quick to adapt to this world of financial technology as a result of which the digital payments sector for the Indian market is speculated to be the largest sector with an estimated transaction value of USD 6,685,102 Million by 2021. Further, the union budget which focuses and promotes digital payments will aid the fintech sector to sector grow multi-folds.
