FinTech Open Month: Union Budget 2022 Implications with Nithin Kamath, Vivek Belgavi and Harshil Mathur

The Union Budget 2022–23, presented by Finance Minister Nirmala Sitharaman, pillared itself on technology, the start-up ecosystem and integrating the concept of digitisation into every space from developing modern solutions to solving agricultural problems, modernisation of the defence sector to recognising the AVGC (Animation, visual effects, gaming and comic) sector by setting up a task force to analyze its full potential. India’s startup ecosystem, which is considered to be one of the fastest growing and third-largest in the world is quickly adapting to these changing scenarios and fostering growth at a much faster pace than one might have imagined.

Starting a conversation on the Union Budget of 2022, as part of the FinTech Month hosted by Niti Aayog and moderated by Chandra Srikanth (Editor, Technology, Start-ups and New Economy at MoneyControl), Nithin Kamath (CEO, Zerodha), Vivek Belgavi (Partner & FinTech Leader, PWC) and Harshil Mathur (Co-Founder & CEO, Razorpay) came together to deliberate on the budget highlights, announcements that excited them the most and their views on a brand-new tech-oriented India.

What stood out in Budget 2022–23 for Nithin was the fact that the Indian Government has taken a step towards accepting Cryptocurrency and is focused on getting the regulations in place for the same. Being in the capital market where most of Nithin’s users are people who lean towards digital money and crypto, this particular budget highlight came as a pleasant surprise. The second thing that excited him was that long-term capital gain surcharge won’t get capped any longer. This is a positive step towards building a digitised ecosystem, as there would be an increase in the number of people investing in tech startups.

For Harshil, there were multiple positives in the budget. From an overall FinTech perspective, the Budget definitely brought a lot to the table with its integration of digitisation and technology in multiple domains, which was very unlike any other Budget announcement that has happened. He spoke about policymakers and their role in helping drive this technological change in the coming days. He also highlighted the announcement of 75 digital banking units being set up across the country through scheduled commercial banks which will help accentuate technology in Tier-2 and 3 cities and will also boost modernization.

Digital Rupee in a Modern India

On the Government’s commitment to digital rupee, FM Nirmala Sitharaman focused on centralized currency being the foundation of the Indian economy. Anything else is considered an “asset”.

Sharing his take on this, Nithin Kamath said that Zerodha users are primarily constituted of people who have already taken the route of digital money, so in terms of stock broking and the capital market ecosystem, the concept of “digital money” already exists.

On the Government’s commitment to digital rupee, FM Nirmala Sitharaman focused on centralized currency being the foundation of the Indian economy. Anything else is considered an “asset”.

Sharing his take on this, Nithin Kamath said that Zerodha users are primarily constituted of people who have already taken the route of digital money, so in terms of stock broking and the capital market ecosystem, the concept of “digital money” already exists.

Harshil further deconstructed the problem and went on to explain that the concept of “digital money” remains the same on a consumer level. It is at the backend that the change needs to be implemented wherein money transfers are happening seamlessly between two banks. That is when the number of instances for payment failures and such inconsistencies will be resolved.

In terms of taking a cue from other countries who have implemented their own CBDC, Vivek used the term “digital twin of a physical note”. He broke the concept down into two parts. The first part concerns the core programmability wherein he says that the adaptation of cryptocurrency — anything that operates on blockchain (decentralized system) will basically allow more control over one’s financial transactions as compared to the centralized system. Elements such as logic reconciliation and accounting will all happen on a single blockchain.

He bet on India piloting this model on subsidies because he believes that is one area with a large scope of reducing inefficiencies by the Government, making it more targeted. In the future, an education subsidy will be used for education only, ensuring the funds are not used for anything else.

Policies Surrounding Neobanking and Account Aggregation

On the topic of Neobanking and how private players and venture capitalists are both gradually leaning towards Neo banks, Harshil elucidated that firmer banking policies around Neobanking will ultimately legitimize the concept. With the Government supporting Neo banking startups, digital services will extend to the remotest areas in India, and will ultimately help bridge the gap between financial institutions and users. He further added that if Neobanking is implemented accurately and efficiently, it is going to fundamentally change the way we look at banking and banking licenses in the MSME sector.

Future of FinTech

On the topic of what the FinTech universe holds for the future, one tends to focus on the fact that there are multiple players operating in the market right now, and that number is increasing. Banks and NBFCs these days have upped their digital games, some even calling ICICI bank the most sophisticated Neo Bank of today’s time. NBFCs have started lending from their own books and have started leveraging technology to acquire and retain customers.

To this, Nithin opined that if Neobanking technologies are developed, then that step will also help him up his game when it comes to Zerodha. In today’s times, traditional banking has taken a back seat and eventually, all entities will have to up their digital games and adhere to the new rules.

Harshil says that disruption is inevitable in this case. FinTech companies focus primarily on solving their customer’s needs and as those needs evolve, companies will have to broaden their horizons, open up their APIs, and embrace disruption to unconstrainedly solve problems for their users.