Budget 2024: Navigating the future of India's fintech sector

From the upcoming interim budget, the fintech sector expects the creation of an environment that nurtures continuous progress in the ever-evolving financial landscape

Bipin Preet Singh
Updated: Jan 29, 2024 01:55:28 PM UTC
Image: Shutterstock

India's fintech sector has emerged as a cornerstone in the nation's economic framework and is expected to contribute an additional $400 billion to the national economy in the next seven years. A standout on the global fintech stage, India’s fintech landscape been a force in bringing financial services to the masses who were left out before.

Previous years' budget announcements have focused on bolstering the backbone of the economy—agriculture and MSMEs (Micro, Small and Medium Enterprises). In line with the emphasis on socio-economic empowerment, all eyes are on the policies that will enable access to financial solutions across the length and breadth of the country. As we gear up for this year's Union Budget, we're keen to see how it will give the fintech industry what it needs to keep innovating. It's not just about the money; it's about creating an environment that nurtures continuous progress in this ever-evolving financial landscape.

Empowering MSMEs 

This year, we expect a special focus on meeting the needs of MSMEs, emphasising a smoother flow of credit. This would involve incentives for the creditors themselves through extended support to microfinance institutions (MFIs) and small finance banks (SFBs). To reach enterprises in remote corners of the country, we also foresee support to digital lending players that offer credit to merchants beyond Tier-II and III cities. This expansion is crucial in leveraging fintech's potential to boost the MSME sector, ensuring these businesses have the resources and support they need to thrive in a competitive market.

A recent CAFRAL report predicts that fintech lending will surpass traditional bank lending by 2030. For this to be possible, digital lending solutions must be rolled out beyond the metros, reaching small businesses and consumers in Tier-III cities and beyond. The anticipated impact of the Open Credit Enablement Network (OCEN) is poised to establish stronger credit flow to merchants across remote parts of the country.

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Responding to the anticipated growth of digital lending, especially for small ticket-size loans, we expect more checks and balances to protect borrowers. Regulatory developments like the forthcoming fintech SRO and cloud repository signal a potential commitment toward fostering a responsible and safe fintech ecosystem.

Progressing into the AI-led future with enhanced digital public infrastructure

In the previous year's Union Budget, the government allocated Rs1500 crores in incentives to fintechs and banks. Capital is welcome, but it is not a constraint for the BFSI space in India, being one of the most capitalised sectors in the country. Beyond capital infusion, we expect incentives for the ecosystem to encourage partnerships between fintech players, public institutions, banks, and NBFCs.

Fintech growth in India has been supported by digital public infrastructure, namely the India Stack, where the Unified Payments Interface (UPI) sits at its second layer. The expectation lies in nurturing an ecosystem where these partnerships between fintechs and public institutions flourish, not just in payments but also in credit, investments and insurance.

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Implementing innovation on top of the India stack starts with encouraging an environment for home-grown technological advancement. Following last year's budget's emphasis on the story of "make AI in India and make AI work for India", by establishing three centres of excellence for Artificial Intelligence (AI) in educational institutions, we expect a focus on further strengthening R&D for AI applications development through enhanced support to the National Supercomputing Mission. We will require sustained investments in local computing power to increase the country's self-reliance by driving the growth of local generative AI solutions.

Credit corpus for small and medium-sized fintechs 

In line with incentives to broaden the reach of digital financial solutions, The Digital Lending Association of India (DLAI) expects a dedicated India Fintech Credit Fund (IFCF) to finance small and medium-sized fintech companies. The financial support would incentivise horizontal expansion beyond Tier-III cities. By nurturing growth in underserved regions, the fund would chart a course for these fintech players to act as economic stimulators in untapped markets. The ripples would not only be felt in the balance sheets of the companies sourcing these loans but also in reshaping the socio-economic landscape of India.


The focus of this year's budget is expected to shift towards fostering greater access to digital solutions, especially in the financial services space, across the country. This approach aligns with the broader narrative of encouraging increased participation in the formal economy. The trajectory conveys a consistent commitment to sectoral growth and a forward-looking approach, recognising the potential of fintech in steering India's economic course.

The writer is the co-founder and CEO at MobiKwik.

The thoughts and opinions shared here are of the author.

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