{"id":6959,"date":"2021-02-25T05:23:52","date_gmt":"2021-02-25T05:23:52","guid":{"rendered":"https:\/\/kredx.com\/blog\/?p=6959"},"modified":"2023-10-26T05:51:48","modified_gmt":"2023-10-26T05:51:48","slug":"union-budget-2021-fintech-needs-access-to-liquidity-from-psu-generated-funds","status":"publish","type":"post","link":"https:\/\/www.kredx.com\/blog\/union-budget-2021-fintech-needs-access-to-liquidity-from-psu-generated-funds\/","title":{"rendered":"Union Budget 2021: Fintech Needs Access To Liquidity From PSU-Generated Funds"},"content":{"rendered":"<p><strong>Union Budget 2021<\/strong><span style=\"font-weight: 400;\"> proposed a bill with Rs. 20000 crore-outlay to establish a Development Financial Institution (DFI). Financial experts believe this bill will prove useful in boosting MSME and SMEs\u2019 access to funds and significantly help the infrastructure and manufacturing sectors. This step is likely to help address the problem of financing gaps, related to long-term infrastructure projects.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The development of a state-of-the-art fintech company in Gujarat will also add to the cause. It will operate to facilitate and develop financial tech services and related products. The Rs. 1500 crore-incentive is expected to create opportunities for fintech companies to adapt to the new standard and facilitate large-scale adoption of digital-based borrowing by MSME and SMEs that are often wary of digital transactions.<\/span><\/p>\n<p><i><span style=\"font-weight: 400;\">Let us proceed to find out more about the <a href=\"https:\/\/kredx.com\/blog\/union-budget-2021-boosts-fdi-limit-and-foreign-control\/\" target=\"_blank\" rel=\"noopener\">Union Budget 2021<\/a> and what it holds for fintech companies in India.<\/span><\/i><\/p>\n<h2><b>Financial Technology Sector \u2013 4 Major Takeaways From The Union Budget 2021<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">The Union Budget 2021 upheld the vision of an \u2018<\/span><i><span style=\"font-weight: 400;\">Aatma Nirbhar Bharat\u2019 <\/span><\/i><span style=\"font-weight: 400;\">or self-reliant India. Key policies and announcements focused on the fintech sector to boost access to liquidity through digital transformation.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">So, without much ado, let us glance at some major takeaways of this year\u2019s budget announcements regarding the technology-based financial sector.<\/span><\/p>\n<h3><b>Fintech Hub In GIFT City<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">As per the announcement, a fintech hub is expected to be set up in Gujarat International Finance Tech (GIFT) City. The upcoming project will emerge as a centre of the fintech sector. It will be the country\u2019s very first operational smart city and an international financial service centre. The fintech hub aims to accelerate the use of Machine Learning and Artificial Intelligence, among others, in the country. Plus, it is expected to promote digitalisation and push tech-based tax functioning more rapidly.<\/span><\/p>\n<h3><b>Allocated Funds To MSME<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">Rs. 157 billion has been allocated to the MSME sector in <\/span><b>Budget 2021<\/b><span style=\"font-weight: 400;\"> to improve its infrastructure and scope. Some key announcements related to MSMEs are \u2013<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Incorporation of individual-owned companies without restricting turnover and paid-up capital<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The budget set for the MSME sector has been increased<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The definition of small companies under the Companies Act, 2013 has been updated<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">The announcement has been received well by the sector and acknowledged as an awaited respite. Furthermore, fintech companies that extend cash flow solutions to businesses have gained significant popularity in these last few years. With the focus being on making credit more accessible and digitalising lending services, one can expect that more businesses, previously wary of the said lending medium, will gain confidence in the set-up.<\/span><\/p>\n<h3><b>Fund Allocation To Boost Digital Payment<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">The last few years witnessed a landmark increase in digital payments. To sustain and boost it further, the government has announced that it has set aside Rs. 15 billion to encourage digital transactions and digitalise the economy.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This decision aims to make e-payments accessible across India, especially in tier-1 and tier-2 cities. As financial institutions go digital to improve access to credit, it can be expected that the current infrastructure and connectivity will improve significantly across the nation to make <\/span><i><span style=\"font-weight: 400;\">Digital India<\/span><\/i><span style=\"font-weight: 400;\"> achievable.\u00a0<\/span><\/p>\n<h3><b>Establishment Of \u2018Bad Bank\u2019<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">This budget also raised the proposal to privatise PSBs with Rs. 200 billion and established a \u2018bad bank\u2019 to manage the Non-Performing Assets. The move to set-up an <\/span><i><span style=\"font-weight: 400;\">Asset Reconstruction and Management Company<\/span><\/i><span style=\"font-weight: 400;\"> is likely to prove useful in managing bad loans and help address the problem of NPAs directly.\u00a0<\/span><\/p>\n<h4><b>Prospect For Fintech \u2013 In A Nutshell<\/b><\/h4>\n<p><span style=\"font-weight: 400;\">The fintech sector\u2019s recognition as a formal industry in <\/span><b>Budget 2021<\/b><span style=\"font-weight: 400;\"> is likely to facilitate collaboration between financial institutions and start-ups, small-scale businesses, etc. It will ensure structured lending and further setting up funds with PSUs.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">If things work out as they are intended to, collectively, PSUs, fintech, and traditional banking industries can significantly boost liquidity and simplify credit access. A primary segment will be <a href=\"https:\/\/www.kredx.com\/working-capital\/invoice-discounting\">invoice discounting platforms<\/a> in this regard.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">These provide businesses with quick solutions to their cash flow crisis. Based on your convenience, you may opt for either invoice discounting or factoring to raise funds tied-up against your unpaid receivables. With the prospect of digitalising lending platforms, one may expect that the role, prominence, and effectiveness of invoice discounting platforms would become more acknowledged in coming years.\u00a0<\/span><\/p>\n<h4><b>Bottom Line:<\/b><\/h4>\n<p><span style=\"font-weight: 400;\">The <strong>Union <\/strong><\/span><b>Budget 2021<\/b><span style=\"font-weight: 400;\"> aims to increase MSMEs\u2019 accessibility to credit through digital lending platforms and related fintech endeavours. As digital transactions gain prominence in India, businesses can leverage the momentum to spur growth in a dynamic business ecosystem.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Union Budget 2021 proposed a bill with Rs. 20000 crore-outlay to establish a Development Financial Institution (DFI). Financial experts believe this bill will prove useful in boosting MSME and SMEs\u2019 access to funds and significantly help the infrastructure and manufacturing sectors. This step is likely to help address the problem of financing gaps, related to [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":6960,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[516],"tags":[385,67,437,844],"class_list":["post-6959","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-budget","tag-fintech","tag-invoice-discounting-platform","tag-msme-sector","tag-union-budget-2021"],"_links":{"self":[{"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/posts\/6959","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/comments?post=6959"}],"version-history":[{"count":1,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/posts\/6959\/revisions"}],"predecessor-version":[{"id":13655,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/posts\/6959\/revisions\/13655"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/media\/6960"}],"wp:attachment":[{"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/media?parent=6959"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/categories?post=6959"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/tags?post=6959"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}