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Budget 2020: Fintech industry expects relief in DDT, GST and KYC compliance for small loans

Amitava Chakrabarty
Budget 2020, Union Budget 2020, Budget 2020 India, Budget 2020 expectations, Budget 2020 expectations of Fintech industry, KYC relief, small loans, DDT, GST, NBFC

Budget 2020 India: Fintech industry is playing an important role when it comes to penetration of financial services products across the country. Fuelled by the growing number of smartphone users, increasing penetration of the internet across the country, and government initiatives like 'Digital India', there has been a surge in the relatively new field of Fintech. Highlighting the rapid rate of adoption of digital transactions and payments, as per a KPMG report, digital payments in India are growing at 12.7 per cent CAGR. Additionally, a report by Statista says that the total transaction value in the digital payments segment is expected to grow at a CAGR of 20.1 per cent between 2019 and 2023, amounting to $134,588 million.

The implementation of advanced tools and technologies is aimed at optimising processes not just internally, but also to provide the end-user with a superior experience by ensuring greater convenience, engagement and enhanced security.

To start with, unsecured loans up to Rs 50,000 issued to first-time borrowers or to those with lean credit histories may be qualified as Priority Sector Lending. This will allow the introduction of better products and higher penetration of credit in a fast-growing, albeit credit under-penetrated segment.

The smaller ticket personal loans are disbursed directly into bank accounts of customers, otherwise, the processing and verification cost becomes relatively high. As loans are disbursed to KYC-compliant bank accounts, Fintech industry wants KYC-relief for such small loans.

"A differentiated view on KYC fulfilment may be adopted for smaller ticket personal loans and double KYC can be eliminated as banks do carry out necessary KYC process for account holders. On similar lines, all regulated entities may be allowed access to Aadhaar-based eKYC / video KYC may be permitted to increase overall productivity. Other than this, for digital documents, uniform stamp duty may be applied for all states," said Jitin Bhasin, Managing Director, RupeeRedee and FincFriends.

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Bhasin also wants changes in Dividend Distribution Tax (DDT) and GST rules for Fintech companies, so that the industry, which is still in nascent stage may flourish.

"Dividend Distribution Tax should be reduced for fintech companies and NBFCs so as to attract more equity capital for on-lending since current regime amounts to double taxation; also, open banking should be promoted via account aggregator model," said Bhasin.

"The industry is looking forward to a differentiated treatment in the upcoming Budget 2020, in order to further strengthen business models and value proposition for customers. Optimisation of GST rates for financial services will further accelerate penetration of digital payment instruments as well as loans and investment products," Bhasin further said.