Here’s a brief overview of how the Budget 2023 has impacted the lending sector.
1. Credit Guarantee Scheme for MSMEs
Last year, the Finance Minister announced a revamp of the credit guarantee scheme for MSMEs. She announced on February 1, 2023, that the revamped scheme would be initiated from April 1 this year with an infusion of ₹9,000 Crores.
Apart from this, the Union Budget 2023 also enables the MSME vertical to opt for an additional guaranteed credit facility of up to ₹2 Lakh Crores. Best of all, this is a collateral-free facility. Overall, the Budget aims to decrease the credit cost for MSMEs by 1%.
This is sure to spur growth within India’s dynamic sector, also called the engine of the economy, by serving its credit needs, especially related to working capital.
2. National Finance Information Registry
The FM also proposed launching a National Finance Information Registry to ensure an efficient access to credit facilities. This will also bring about increased financial stability in the lending sector. The registry will serve as a central repository for all financial information.
A new framework will be adopted to administer this credit infrastructure by working alongside the RBI. This is expected to play a large role in supporting the government’s aim to improve financial inclusion.
3. Simplified Digital ID Requirements
Along with many other tech-driven initiatives, the Union Budget 2023 has proposed a further simplified ‘Know Your Customer’ (KYC) procedure for financial services. Your PAN number will now be used as a common identification system.
Instead of a homogenised KYC procedure for all, a risk-based approach will help you easily access credit facilities.
Moreover, the expansion of the DigiLocker services provided by the Government is a significant boost for all fintechs. This facility was restricted only to individuals previously. Now, the secured option to store crucial documents can aid fintechs to get and share documents instantly.
The scope of document storage for individuals has also been extended. Thanks to this facility, you can securely store crucial documents such as:
Driving licence
PAN card
Academic records
Aadhaar card
This helps you access credit when you need it faster and easier. With the expansion of DigiLocker services, banks and financial institutions can store and share data online quickly and securely.
4. Improvement of Governance in Banking
In addition to the pointers mentioned above, Budget 2023 also emphasised improving governance and offering more protection to investors.
As per the announcement, certain amendments will be made to the current Banking Regulation Act, RBI Act and Banking Companies Act. Changes in these can affect the existing mode of the banking system by deploying a more rigorous approach.
More information on this is still awaited to truly understand its impact on the lending sector.
5. Fintechs to Benefit from Digital Public Infrastructure
The fintech sector, one of the key players in India’s economic growth, was banking on a progressive Budget 2023. Shrimati Nirmala Sitharaman reiterated in her Budget speech that the sector would be able to contribute to high economic growth throughout 2023-24 via Digital Public Infrastructure like:
While the Union Budget 2023 has not explicitly focused on any banking sector reforms, which include public sector bank privatisation, the lending landscape still looks inviting.
With the Budget 2023 being the first normal budget post the pandemic, it aims to strive for stable medium-term economic growth. The Indian economy is heading on the right track, and the inclusion of these reforms can help unleash India’s growth potential.