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Budget 2024: India’s Fintech Sector Needs Fillips to Spread Its Wings

Submitted by admin on March 15th, 2024

India’s Finance Minister Nirmala Sitharaman presented the 2024 budget in the lower house of parliament (Loksabha) on February 1. The fintech sector expected that the government would have a plan to create an environment for fostering continuous growth fine-tuned with the ever-changing financial landscape.

India’s fintech sector has established itself as a foundation brick of the country’s economic structure. The sector is projected to contribute $400 billion more to the nation’s economy in seven years. It has already established a strong foothold as a stand-out entity in the global stage and reached financial services to those who were left untouched before.

In the interim Budget 2023, the government was more focused on strengthening the backbone of the country’s economy through massive empowerment of the agricultural sector and MSMWs (Micro, Small, and Medium Enterprises). With the government’s repeated emphasis on socio-economic empowerment, people were expecting policies enabling quick access to financial solutions across the country.

At this point, India’s fintech industry needs innovation, and the demand is not restricted to money; rather creating and nurturing an environment for relentless growth in line with the ever-changing financial landscape are the needs of the hour.

MSMEs’ Empowerment

This year, the government has expectedly paid special attention to the needs of MSMEs, facilitating an easier flow of credit lines. This involves incentives for the creditors through greater support to small finance banks or SFBs and microfinance institutions or MFIs.

To reach out to enterprises in rural sectors, digital lending institutions must play a crucial role and hence, need a greater financial boost. These digital players provide loans to merchants from Tier-II and Tier-III cities and even beyond that.

This expansion helps leverage fintech’s potential to empower the MSME sector by assuring that these businesses will never run out of resources and support, which are required to thrive in a highly competitive market.

As per a recent CAFRAL Report, fintech lending will go beyond traditional lending through the banking system by 2030. For this to happen, digital lending services should reach out beyond metros, touching the lives of consumers and small businesses in Tier-III cities and even remote villages.

The expected impact of the OCEN (Open Credit Enablement Network) will extend to remote parts of India and establish strong and quicker credit flow.

A Leap into AI-Driven Future: Enhancement of Digital Public Infrastructure  

In the 2023 Union Budget, the government set up a Rs 1500 crore fund to provide incentives to banks and fintechs. Capital flow is certainly welcome but money is not a barrier for the BFSI space in the country because it is one of the most monetized sectors in India. It needs incentives beyond capital infusion, which will help the ecosystem to build and boost partnerships between fintech players, banks, NBFCs, and public institutions.

In India, fintech growth receives support from digital public infrastructure, the India Stack where UPI (Unified Payments Interface) functions as its second layer. The expectation always revolves around nurturing an ecosystem that can effectively contribute to flourishing partnerships between public institutions and fintechs, in payments as well as in credit, insurance, and investment.