To make India a cashless or less-cash society, everyone has to be empowered to accept payment other than cash and need mechanism to live without cash a habit.
Union Budget 2019: The first phase of Modi government started with a big digital leap by introducing a host of digital initiatives like – eSign, eHospital, Digi Locker, BHIM (Bharat Interface for Money) UPI (Unified Payments Interface), Direct Benefit Transfer (DBT), EPFO web portal & mobile app etc. Demonetisation was also a big step to push India towards digital economy.
Although such initiatives attracted many established players and startups, but economic slowdown coupled with high joblessness hit the governments effort of financial inclusion hard.
“Financial inclusion and creation of employment opportunities are the two main pillars that will ensure that the economically deprived sections of our society get a chance to change their circumstances and lead better lives. In the last interim budget, the government’s announcement to create 1 lakh digital villages in the next 5 years is a great initiative in that direction,” says Anand Kumar Bajaj, Founder & CEO, PayNearby.
Despite the effort to make India a cashless or less-cash society, cash is needed to make almost every payments – for example right from morning, persons like newspaper vendor, milkman, maid servant etc. visit us and all of them accept cash. So, to go cashless, everyone has to be empowered to accept payment in any mode other than cash and need mechanism to live without cash a habit.
“Though our country has taken rapid strides towards financial inclusion in the last few years, we are still largely a cash based economy. More than 45 per cent of the country’s bank accounts have no transactions and only 13 per cent Indian adults borrow through formal channels. The creation of a regulatory, social, commercial and infrastructure framework that will help in the creation of the last mile access of financial and other primary services to the larger India is thus one of the primary needs of the subcontinent,” said Bajaj.
Unless digitisation is implemented and accepted in large scale, it becomes difficult for fintech companies, especially the new one to survive. So, the fintech sector expects that the government extends its helping hand to save the sector.
“We are optimistic that the upcoming budget will have sops that will push and help amplify efforts in that direction. A key area where we are expecting reforms is relooking at the GST that is levied on services aimed at financial inclusion. GST of 18 per cent on products that have wafer thin margins creates huge burden in the system and needs intervention to make the proposition attractive for incumbents and new players. Also, changing the definition of start-ups to increase the threshold turnover is necessary as financial services include products that swell the turnover, but due to wafer thin margins, our PBT ratios are way lower than normal industries,” said Bajaj.
“As distribution forms a key peg and is one of the primary drivers to create last mile access, it is important to create an environment where the last level agent is incentivised to enter this business. A key area to look at in this direction is the exclusion of TDS on commission paid to retailers working for financial inclusion. A last level agent who deals with the end customers may not have the right means to apply for a no TDS certificate and still bear TDS while earning lower than the minimum slab. We request the government to help us remove the burden of TDS on them,” he added.