In last year's Budget, the finance minister announced pillars on which the proposals would be based – creating financial capital, improving human capital, kickstarting innovation and R&D, etc., to name a few. As the COVID-19 pandemic is crawling its way back into the lives of Indian citizens, the Union Budget 2022-23 is an opportunity to streamline various sectors that need the government's attention. Though 2021 was a positive year where we witnessed a steady recovery despite the pandemic, we expect the measures to sustain the growth momentum of the fintech industry to be part of Finance Minister Sitharaman's budget bag.
Since the Reserve Bank of India has created a new department to regulate and oversee fintech companies, there's a good possibility that the government will emphasize the sector in Budget FY22-23, providing incentives that could help the industry usher into a "FinTech Revolution". The fintech sector can promote financial inclusion and generate significant employment opportunities with suitable measures. Within the fintech industry, Peer-to-Peer (P2P) Lending has an enormous potential to expand as a vital part of the sector, with more encouraging steps to invest in it. P2P lending space can solve the concerns of credit accessibility for the country's citizens.
Encourage investors to invest in tech-backed asset class
One way of doing that would be, the returns from Peer-to-Peer (P2P) Lending investments could be tax-free under Section 80C of the Income Tax Act, or special provisions could be introduced to lower tax rates, such as a tax exemption for earnings under Rs 20,000. It will encourage investors to invest in a technology-backed asset class that offers better returns when compared with traditional assets. Additionally, it would increase the purchasing power capacity of individuals and fulfill one's dream or get access to funds during emergencies. In India, P2P lending is emerging as a crucial segment to empower small enterprises. Further, the sector will witness accelerated growth that contributes to the country's economy.
The formation of the fintech department by RBI is a positive move. We wish the Budget comes up with a policy framework to protect the lenders' interest and enhanced procedural aid to recover their money from digital borrowers. A specialized government vehicle to manage fintech might not only help companies run more efficiently while adhering to compliance rules, but it could also assist fraudsters to be eliminated and boost investors' confidence.
Need for technical, financial competence through educational institutes
There were significant job losses during the pandemic. The primary reason was various industries' inability to keep up with the evolving technology. In India, fintech education is the need of the hour. The government has been spreading awareness about the technology skill-building initiatives, which is a significant step, but it will positively impact our economy if additional actions are taken. Setting up avenues for advanced technical education is necessary to affect the employability of the country's population. Presently, India requires professionals with technical and financial competence to conduct the Fintech revolution. More institutions that provide formal education and certifications in fintech are needed to create a skilled group of individuals required to grow P2P lending platforms and the other sub-sectors in the Fintech industry.
P2P lending, as a significant component of the larger finfech sector, is quickly becoming the most popular alternative investment option. There is a need for policy to help the industry evolve and more innovative fintech enter the space of digital lending or P2P lending.
Treat fintech, startups equally in policy framework
Fintech firms and other startups should be treated equally in the policy framework. Sharing technological advancements with fintechs and startups can help to accelerate the objective of financial inclusion. These are only a few of our expectations from the upcoming budget, and now it's up to policymakers to develop a practical growth and development strategy. Until then, we wait until February 1 with great anticipation.
The author is Co-founder and CEO of LenDenClub-Peer to Peer (P2P) lending platform. Views are personal.
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