Budget 2019: Fintech & Start-up players on Union Budget

Gaurav Chopra (L) and Vinay Bagri (R), Founder & CEO of IndiaLends and the Co-founder & CEO of NiYO respectively

By Gaurav Chopra

The maiden Budget presented by Finance Minister Nirmala Sitharaman holds great promise for the Indian start-up Inc. I am particularly enthused by Government’s following decisions:

Measures to revive the NBFC sector:

Allowing Foreign Institutional and Portfolio Investors to invest in debt securities offered by non-banking financial companies (NBFC).

The decisions for provisioning a one-time six-month partial credit guarantee to PSBs for first loss up to 10% for the purchase of high-rated pooled assets of financially sound NBFCs amounting to a total of Rs 1 Lakh crore and enabling liquidity access to fundamentally sound NBFCs by ensuring funding from banks and mutual funds. These steps will help ease the liquidity in the market and will aid the smaller and mid-size NBFCs to get the much-needed credit support.

Announcement to setup a dedicated TV programme on DD exclusively for the Start-ups:

This move is welcomed by the overall start-up Inc as this dedicated programme will provide a medium to the emerging start-ups to connect directly with venture capitalists and will help understand and work on solving the issues faced by the start-ups in the country. Government’s intent and dedication to promote start-ups is clear through this move.

Providing Public Sector Banks Rs. 70,000 crore to boost capital and improve credit:

Indian banking sector has been affected with bad loans that have risen off late. This move will give banks some breathing room and help improve confidence in the market. Infusing fresh capital in PSBs is imperative for the overall growth of the NBFC ecosystem, as NBFCs depend on banks for their capital needs. This move will help get lending back on track while stimulating growth across sectors.

By Vinay Bagri

Finance Minister Nirmala Sitharaman has presented a pragmatic budget with positive objectives for long-term growth. The first full Budget by the new government is banking heavily on growth to ensure inclusive and sustained development. It has a lot of key takeaways, particularly for the MSME, affordable housing and start-up sectors. Few of the welcome initiatives are as follows:

  1. Centre will create a payment platform for MSMEs for payment of bills, which will be a huge enabler to digitize the entire economic value chain of MSMEs, including their upstream and downstream payments ecosystem. This can generate additional financial footprint along with GST records, and enable MSMEs access credit and other financial services easily. 
  2. To discourage the practice of making business payments in cash, a 2% tax to be levied on cash withdrawal exceeding Rs 1 crore in a year from a bank account. Even though it seems like a coercive measure, again this can be a big push for “Digital India” initiative, pushing the MSME ecosystem to a digital payments environment. 
  3. A slew of measures have been announced to ease the liquidity crisis of the NBFC sector, including setting up Credit Guarantee Enhancement Corporation, allowing FIIs and FPIs investment in debt securities issued by NBFCs and streamlining the regulatory framework of housing finance companies (HFCs) by bringing them under the direct regulatory supervision of RBI.

 

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(The authors of this article are the Founder & CEO of IndiaLends and the Co-founder & CEO of NiYO respectively)

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