Startups are asking for a push to widespread usage of e-signature to authenticate documents digitally, and for a complete paperless on-boarding of accounts.
Financial tech companies in India are hoping that the upcoming budget will push for paperless access to financial products, as much as it did for digital payments in the last year’s budget, besides calling for a simplification of taxation laws and opening up of credit availability.
“With the readiness of IndiaStack, 2018 can be the year of paperless access to financial products. This is important as the RBI household committee report states that household income can increase by as much as 10% if consumers access the right financial products,” Adhil Shetty, Co-founder and CEO, BankBazaar.com says.
Some recent initiatives under India Stack, such as such Aadhar and UPI, can provide an opportunity for banks, insurers, and other players in the fintech sphere to promote financial inclusion if the country pushes for paperless financial transactions, he adds.
Shetty suggests an increase in the monetary limit for PaperLess e-KYC via OTP, which will remove the need to collect the physical copy of other identification documents such as PAN and Passport.
Experts are also asking for a push for widespread usage of e-Sign to authenticate documents digitally, and for complete paperless on-boarding of accounts for all financial products including the adoption of e-NACH and DigiLocker technologies can enhance digital financial inclusion of the country.
“In order to give a boost to the growth of fintech sector in India, we expect the Government to take policy initiatives with a stated mission to become a Global Fintech hub by year 2020,” Rajeev Mahajan, Co-Founder, Director and CEO at Antworks Money says.
India currently lags behind US, China, UK, and Singapore in funding and growth of fintech sector.
The first step, Mahajan says, is to set up multidisciplinary fintech innovation centres which will work on building eco system required for growth of fintech sector in India.
These centres will also have the capability to incubate new products and services and act as a bridge between entrepreneurs, regulators and Government bodies.
“Government’s intent to support fintech startups is clear, but little has happened on the ground. The benefits haven’t transpired as originally transpired,” Satyam Kumar, co-founder and CEO of Loan tap says.
The tax benefit under the Rs 10,000 crore Funds of Funds, handled by SIDBI, hasn’t seen much traction for a large number of fintech startups.
The industry is also gunning for a Venture Capital fund under the Ministry of Finance, managed by professional fund managers with prior experience of working with fintech funds. “This fund will invest in Indian fintech start-ups and help in easing the fund raising pressure on Indian fintech startups,” Mahajan adds.
The most crucial demand that the entire fintech sector has from the government is to relax regulatory environment and compliance parameters for fintech sector, to allow them to test their products and services.
Several startups have faced “unfair” scrutiny from Income Tax department since last year over valuations at which capital was raised from angel investors. At the heart of the matter is the "angel tax" clause introduced in the Income Tax Act in the 2012 budget.
At present, the angel tax rate stands at a whopping 30 percent, which according to Nasscom has resulted in a 53 percent drop in angel funding during the first half of 2017.
Taxation has been the biggest challenge for any startup. The fintech players are therefore also seeking a reduction in corporate tax from 25 percent (for SMEs) to a more reasonable ratio of 12%.
Startups say that will be a relief to potential lenders and aggregators and subsequently, they can pass on the benefit to their customers.
“We expect the corporate tax to be reduced for start-ups that are driving Make in India by investing in product development and manufacturing. We expect a reduction in Income Tax for individuals working in companies promoting the startup ecosystem. Include measures to improve digital literacy and provide high-speed internet to every citizen and empowering them with access to mobile internet,” Kumar Abhishek, CEO and Co-founder of ToneTag says.
On the direct tax, Archit Gupta, Founder and CEO of ClearTax says it is crucial for the government to allow a higher corpus withdrawal for National Pension Scheme, without any or minimal tax implication.
“There should be more benefits to home loan customers; the medical reimbursement limit should be enhanced. It will help people save more on taxes while building wealth, encourage financial discipline and positive investment habits. Increasing the limit from Rs 1.5 lakh to Rs. 2 lakhs, the tax saved will be Rs 2575 (for the 10% tax bracket), Rs 10,300 (for 20% tax bracket) and Rs 15,450 (for the 30% tax bracket),” Gupta says.
The emphasis, Manish Khera, Co-founder and CEO of Happy Loans says, should rather be on building digital solution in every aspect of financing. “For that, we need to look at separate allocation in the budget to increase and build awareness for digital transactions across the country,” he adds.
Mahajan of Antworks agrees, and adds that such policy initiatives have the potential to transform the financial sector in India and can add as much as 0.5 percent to the GDP growth directly and /or indirectly.
As a corollary, the fintech sector is hoping that the coverage of Micro Units Development and Refinance Agency (MUDRA) Bank and other credit guarantee schemes focussed on MSMEs will be expanded to cover new age business models and fintech platforms also. It will help the sector get more access to credit and digital existence.
MUDRA Bank was set up to refinance and supply a whopping Rs 32 billion shortfall faced by the companies delivering credit to the MSMEs, but the scheme doesn't cover Fintech players as yet, neither do any other existing credit guarantee schemes in the country.“Secured API access to customer information using GST system and simplification around GST will be an additional benefit,” adds Alok Mittal, President of Digital Lenders Association of India & CEO of Indifi Technologies.