The current government introduces its third budget of the term in the upcoming 1st February 2022, several objectives of NBFC (Non-Banking Financial Companies) and Financial Technology (Fintech) start-ups have come across concerning easing of criteria related to taxation and assistance from the government in terms of giving low-cost liquidity to the retail NBFCs.
Here are the expectations of the NBFC.
- Relaxing tax standards for fintech.
- NBFC Low-Cost Funding Expectations.
- Facilitate liquidity flows to NBFC and Fintech.
- Easing GST/TDS standards.
- Increased attention to MSMEs and rural development.
Relaxing tax standards for fintech.
The fintech industry expects the government to develop an ecosystem that is responsive to the growth of technology-driven launches in the fintech sector. The stalwarts from the Financial Technology industry announced that the expectation from the budget is towards motivating the lending NBFCs who are operating financial and technology grounded interventions to provide a boost to the underserved small and medium enterprises.
They said the government should work to ease the tax standards for NBFCs and give them significant liquidity assistance.
They also suggested that motivation should be given to female entrepreneurs by providing similar incentives to tax deductions, ease of access to loans, among others.
NBFCs expectations for low-cost funding.
The NBFC sector has raised a question to the government that the priority of the budget must be moved towards those Micro Small and Medium Enterprises (MSMEs) and small entrepreneurs who haven’t been suitable to generate loans at cheap rates and are in a way underbanked. This offer is expected to make the loan service process easier for them.
NBFC estimates that the Pradhan Mantri Awas Yojana programme (1) should be extended to all rural and urban areas. Benefits must be provided to those in the affordable housing sector, which will help stimulate the economy.
One of the advice is to facilitate the compliance framework for the NBFCs who are providing loans to the underbanked and unbanked small entrepreneurs and MSMEs so that they can be involved in the formal banking policy.
They also believe that liberalised, low-cost financing for retail NBFCs is really important for growth in sub-banking sectors.
Relaxation of liquidity flows to NBFCs and Fintechs.
The economy is making efforts in response to losses due to the pandemic and has developed a growth path. The government’s efforts to recognise the enhanced operations blended with the effectiveness of the fintech to fulfil the lending requirements of the underserved
and unserved sectors of society has given positive signs to the industry.
The fintech industry is awaiting that these efforts made by both the government and the fintech industry are given further motivation in the upcoming budget by publicizing measures to ease the liquidity inflow to the NBFCs and the fintech.
Still, with the right degree of regulation and liberalization of tax governance, it can also give the right ecosystem for the fintech to grow and give innovative credit results for the underserved and cash strapped borrowers, If the budget is suitable to deliver on the parameters of relaxation in the norms of liquidity.
Easing GST/TDS standards.
Fintech and the start-up industry grew phenomenally during the pandemic. These industries now expect the budget to keep them growing and keep investors confident.
- Buying Point of Trade (PoS) terminals requires tax exemptions.
- Exemptions from GST rates for rural banking agents who remit money between homes.
- Subsidies must be granted to offset the waiving of the Merchant Discount Rate (MDR).
The benefits of digital payments have reached intelligent technology customers because of the gentle taxation in place for these independent digital customers. To ensure that the advantages of digital payments reach the lower-tech smart section of the community and accomplish the lofty goal of financial inclusion, there’s a want from the government’s side to introduce relaxations in GST and Tax Subtracted at Source (TDS) in the financial addition of services which are offered by the business outlets across India.
If the government provides the GST and TDS exemption in these services as well, it will lead to a reduction in the cost of providing financial services.
Taking into account the phenomenal development of the launch-ups in times of pandemic, another suggestion from the business is to extend the scope of the Startup India Seed Fund Scheme so that the growth of acquainted startups are given financial contribution for exploration and development, prototype development and for products and service trials.
Greater emphasis on MSME and rural development.
The financial sector considers that the budget should focus on the revival of the financial sector through the development of the rural sector and the revival of MSMEs. This in turn increases the opportunities for livelihoods. To do this, the government has to increase loans to MSMEs. The expectations of NBFCs about increased lending to the rural sector require an adjustment of regulations for NBFCs and banks, particularly about tax and collection matters. NBFCs expect to be able to grant guarantees on the same basis as banks. Other expectations of NBFCs and fintech discriminate between lending to individuals and small businesses and lending to large companies.
Conclusion
The intentions of the NBFCs and Fintechs in this budget revolve around the topics of relaxations in tax standards for the fintech, funding for NBFCs at low cost, ease liquidity flow towards the NBFCs and Fintechs, relaxation in norms connected to GST, TDS, boosted Focus on MSMEs and Rural Development. To add up the expectations of NBFCs and Fintechs is the easing of the norms of lending and funding to the small-scale sector at lower tax rates and procedure of NBFCs at par with banks in periods of issuing guarantees as the banks perform.
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