From E-KYC norms to credit guarantees, here’s what digital lending startups want from Budget 2019

Budget 2019 is just some two weeks away and expectations from various segments of the business world are being voiced. Digital lending startups that have been riding on the back of insta-loans have also pointed out few expectations that could help boost their growth. Budget will be presented by Finance Minister Nirmala Sitharaman on July 05, 2019. This time lending startups are hoping for enhancement of regulatory measures such as e-KYC norms, financial structure, digital boost and also credit guarantee. 

Talking about the budget 2019 expectations, Bala Parthasarathy, CEO & co-founder, MoneyTap said, “Digital lending start-ups have emerged as a massive boon for the country in the last couple of years. For one, it has brought hassle-free and quick credit to a large set of NTC (new to credit) and unbanked population. The market for small-ticket loans is huge, and the new-age fintech lenders are serving to this need for millions of consumers and SMEs.”

Parthasarathy added, “With the Modi Government 2.0 in session now, Budget 2019 is set to be announced soon. The fintech industry is expecting the Government to focus more on increasing the availability of digital financial services to drive greater financial inclusion and faster growth for the industry.”

A few key developments MoneyTap CEO hopes to see in the Budget are:

1. Regulatory measures

E-KYC/Central KYC: The Government should look to introduce a framework for implementing centralized KYC system to provide a conducive ecosystem to fintech companies, digital lenders, as well as mainstream financial companies. It will make the process seamless and will serve to simplify their consumer interaction. With the Aadhaar becoming valid for eKYC for the banks, fintech firms who work with the banks will be able to deliver their products & services to more consumers at reduced operational costs and lower turnaround time. Hopefully, the eKYC will be extended to NBFCs as well.

Developing more open APIs: Financial regulators in the country need to take more steps to promote innovation in the space of fintech and digital financial services. For this, they need to work on two fronts. One is building and implementing more open API frameworks that allow fintech companies to enhance their digital infrastructure and serve more consumers efficiently. The second is to nurture regulatory sandboxes that allow fintech players to develop new products and services for SMEs, insurance, etc.

2. Expanding the Digital India program

The Digital India program has offered numerous substantial benefits to enable the growth of the fintech sector and the overall digital economy. Parthasarathy said, “ We are optimistic about finding new initiatives included in this program.”

A critical step that the Government needs to take is to strengthen the fintech committee formed within the Ministry of Finance during last year’s Budget. The committee must work towards designing policies that allow both existing and emerging fintech players, as well as established financial services firms in the country to deliver paperless and presence-less access to finance to consumers.

Taking measures to boost digital adoption across the country and creating awareness regarding digital financial services such as payments, lending, and insurance by incentivizing online transactions.

Introducing policies to formalize alternate data sources for credit assessment and decision-making by establishing new variants of traditional credit bureaus or expanding the scope of activities permitted to the existing ones.

“We also expect the Government to take necessary measures on data protection given the increasing focus on digitization of the economy. Policies related to data privacy and security will go a long way in strengthening the impact of the Digital India program while providing the Fintech industry with a concrete framework to operate with,” Parthasarathy added.

3. Administrative support

Administrative support goes a long way in empowering fintech players. Simplification of the process of compliances and easing of regulatory friction will only provide a lift to the Government’s vision of developing a cashless economy.

4. Credit guarantee

Finally, Parthasarathy, further hopes that the Government considers expanding the scope of services under the MUDRA scheme and other existing credit guarantee schemes to cover fintech. It will enable the sector to boost credit supply within the country.