Budget 2023: Fintechs, NBFCs look out for a liquidity booster from FM for financial inclusion

Ahead of the Union Budget 2023 on February 1, experts from the fintech industry and non-banking financial companies (NBFCs) are hoping the government will announce measures to boost financial inclusion.

These include more liquidity infusion besides measures to boost partnerships between banks, NBFCs and other institutions to promote financial inclusion.

Liquidity boost

“The government should roll out measures to boost the liquidity flow to fintechs and smaller NBFCs. This will, in turn, ease credit access to the underserved, thus furthering financial inclusion in the country," said Nalin Negi, interim Chief Executive Officer (CEO) of BharatPe.

Vikas Garg, Co-founder and CEO, Paytail, another fintech company, too, pitched for additional government support.

“Fintech companies are navigating the country's path towards financial inclusion, where the robust techstack in combination with a strong distribution network is going to ensure the availability of financial products across the country,” Garg said.

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Garg also expects the budget to provide financial assistance and scope of growth for financial companies.

“As one of the players operating in the fintech environment, we are hoping for tax subsidies that would support more investment in the fintech sector, thus facilitating creation of innovative technologies for better credit provision,” Gard added.

The Centre, in the 2022-23 Budget, emphasised universal financial inclusion by announcing initiatives around digital banking and currency.

Other than this, the budget also worked on creating a digital pipeline for the Pradhan Mantri Jan Dhan Yojana (PMJDY) and brought in measures for the digital payment system.

Fintech-NBFC partnerships

Also, promoting fintech and NBFC partnerships with banks can play a pivotal role to boost financial inclusion, said experts.

In recent months, banks and fintechs have been joining hands to work on financial inclusion.

BUDGET 2023: Catch all updates here

For instance, Axis Bank tied up with Open, a digital banking enterprise, and DBS Bank partnered with Gofrugal Technologies, a platform offering Enterprise Resource Planning solutions, to adopt an Open Network for Digital Commerce to its enterprise customers.

Also read: Banks go big on partnerships to expand services, lure customers

Some experts say that the Budget is an opportunity for Government to put the focus back on priority sector lending to the underserved and underprivileged where banks can collaborate with fintechs to expand financial inclusion.

"Partnering with smaller and last-mile focused fintechs is the right way for banks to forward-lend to priority sector, which benefits both the lenders and the borrowers,” said Hardika Shah, founder and CEO of Kinara Capital, a lending fintech company.

Digital push

Experts expect more measures to promote Unified Payments Interface (UPI)-based transactions from the Budget.

In December 2022, UPI recorded the highest ever monthly transaction number, reaching 782 crore, and totalling Rs 12.82 trillion in transactions, showing tremendous growth and demand.

Also read: UPI payments touch record high of Rs 12.82 lakh crore in December

Experts said to take UPI to the next level of growth, there is a need to encourage more partnerships between major banks and fintechs.

“UPI has emerged as a de facto payment medium for millions and digital lending is also gaining acceptance across the established as well as emerging cities. I believe that the fintech industry should be given additional benefits of tax deductions which are available for SMEs (Small and Medium Enterprises), so as to aid inclusion,” said Negi.