Union Budget 2023: What Are the Pre-Budget Expectations for the FinTech and Digital Lending Sector?


The FinTech sector in India is growing rapidly. Reports indicate that the industry
is projected to generate $200 billion in revenue by 2030. This is due to a
number of factors, including the increasing digitisation of the country,
favourable demographic dividends, government support, and technological

Furthermore, digital lending has become more popular because of the
convenience of the digitalised process and use of alternate data sources. The
government has been actively involved in providing the sector with the
necessary support, while venture capitalists and investors are providing the
influx of investments.

Union Budget 2023: What Are the Pre-Budget Expectations for the FinTech and Digital Lending Sector?

The growth of the industry is also being propelled by the widespread
availability of smartphones and internet access. This has resulted in a rise in
the number of FinTech startups in the country, such as CredAble and UpScale,
which are utilising technologies like AI, ML, and Cloud Computing to provide
customers with innovative products and services.

As the Union Budget 2023-24 approaches, FinTech leaders are expecting the
government to introduce measures to further boost the industry’s growth and

It is clear that the FinTech industry in India is on an upward trajectory and is set
to reach unprecedented levels of success in the coming years. Factors such as
government support, digitisation, technological advances, and the proliferation
of smartphones are playing a major role in this growth.

Union Budget 2023: Top expectations of the FinTech sector

As India is one of the fastest-growing FinTech hubs in the world, the sector has
pinned high hopes on the upcoming budget to introduce support mechanisms
and a liberal regulatory framework that will help them fast-track innovation.

While the Union Budget 2022 brought forth path-breaking reforms such as the
introduction of the Digital Rupee, this year, alongside easier tax rules, the
biggest ask on the FinTech front is for specific schemes to infuse more liquidity
into the system. They are also seeking incentives that will help widen their
participation in the country’s financial economy and strengthen their
partnerships with banks.

Here are 5 major expectations of the industry from Union Budget 2023:

1. Increased Tax relief

The need of the hour is to reduce the magnitude of the tax burden on the
FinTech sector. Along with simplifying taxation, the government should also
look into waiving off Goods and Services Tax (GST) for FinTech companies with
annual turnover under Rs 10 crore.

FinTechs have played a vital role in boosting financial inclusion, especially in the
rural parts of the country. NBFCs and FinTech companies involved in financial
inclusion services will also benefit from GST and Tax Deducted at Source (TDS)
subsidies. With a renewed focus on financial inclusion, the industry is expecting
the budget to unveil tax reforms that will help them stay focused on their plans
of reaching out to the unbanked population in the country.

To save on taxes, the industry is also seeking additional depreciation on the
fixed assets used by FinTech companies. The criterion for tax relaxation needs
to be extended to employees of FinTech startups as well, especially for those in
the nascent stage. The government needs to introduce tax reforms that reduce
the burden on taxation of ESOP sales.

2. Make capital more accessible and affordable.

In a bid to sustain the growth momentum of the FinTech industry, government
interventions to reduce the cost of funds and enable better access to capital
are needed.

Owing to the increase in repo rates and cost of borrowing, the government
needs to consider introducing dedicated debt financing channels for FinTechs in
the digital lending space. There is a pressing need to accelerate the progress
made in catering to the cohorts that lack access to formal financial services and
credit. Dedicated interventions must be provided to support the availability of
affordable financing facilities.

3. Re-evaluate the FLDG model

With a lot of expectations riding on the upcoming budget, the FinTech leaders
are looking to the government to introduce better lending arrangements with
banks and Non-Banking Financial Companies (NBFCs). The need to open up
more avenues of financing, be it from banks, global lenders, or via
infrastructure schemes is also rising to the top as the primary ask of the
FinTech sector. Enabling co-lending arrangements with Public Sector Banks will
be a step in the right direction to further drive financial inclusion in the

That said, policies that simplify the conditions under co-lending models need to
be in place. Apart from the liberalisation of the current FLDG model, risk
mitigation measures also need to be introduced.

Establishing a reasonable cap on the FLDG model will go a long way in easing
the financial burden on the FinTech sector and further enhancing access to

4. Enhance digital payment systems and infrastructures

The rapid adoption of UPI payments has helped in strengthening India’s
position as a global leader in digital payment transactions. Additionally, the
launch of CBDCs has significantly reduced the dependency on cash and further
improved the resilience of digital payment systems.

Measures to reduce the cost of digital transactions and incentivise the
development of innovative digital solutions like the UPI need to be introduced.

5. Increase cooperation with banking institutions

The upcoming budget should promote key collaboration between banks and
FinTech companies. While FinTech companies can tap into the bank’s larger
customer base; banks can leverage the tech-enabled solution suite of the
new-age FinTech players.

Banks that join forces with last-mile-focused FinTech lenders will be able to
boost the liquidity flow. The Union Budget needs to introduce regulations for
loan disbursal and put in place policies to ensure sufficient liquidity for the
organised gold loan segment to promote such future collaborations.

FinTechs in 2023: A new era of financial inclusion

Over the years, the FinTech industry has been a major driver in transforming
and enlarging the financial services industry. In India, FinTech has become one
of the speediest-developing sectors and has played a role in enhancing financial
inclusion and digital adoption among citizens.

After the Reserve Bank of India acknowledged the part of digital lenders, credit
penetration is anticipated to grow soon. By offering better access to credit and
helping the MSME sector, digital lending FinTechs will persist in being victorious
and stimulate more comprehensive financial inclusivity.

To speed up India’s FinTech growth and make it easier for people to access
secure credit from digital lenders, Budget 2023 should present pertinent


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