India is unquestionably leading the fintech revolution, and the pace of innovation and technical development worldwide is unmatched. The fintech landscape in India has experienced high-speed expansion with the aid of enablers like widespread internet usage, broad area network coverage, quick technological adoption, and epidemic-enhanced digital penetration.
Customer expectations, the need for reliable, safe services and a demand for a more accessible financial environment have all dramatically increased due to growing globalization and consumerism.
Credit and finance for MSMEs
Many micro, small, and medium-sized firms (MSMEs) in India find it difficult to access traditional banking channels. Therefore, the adoption of digital-lending platforms by small businesses has increased in the aftermath of COVID-19.
The digital platform’s MSME loan book has witnessed growth over the previous year, thanks to the ability to apply for instant financing digitally. Traditional and new-age borrowers from India’s rural and metropolises have been drawn to the digital channel by the rapid use of smartphone devices at affordable prices and the penetration of the internet.
This point is where the neobanks enter the picture. These fintech service providers offer customers financial and banking services that are more convenient and cheaper than traditional banking. Banking service providers like Niyogin offer impact-centric solutions and have created the “Neobank” platform infrastructure to drive MSMEs in rural and urban areas.
Governmental support for MSME financing in general
Digital-lending platforms have also participated in the Emergency Credit Line Guarantee Scheme (ECLGS). The government introduced this scheme as a component of the Rs 20 lakh crore Atmanirbhar package in 2021 after COVID-19.
Under the fourth version of the plan, ECLGS 4.0, the Ministry of Finance has issued an extension of the Rs. 3 lakh crore Scheme from June 30, 2021, to September 30, 2021.
Last month, finance minister Smt. Nirmala Sitharaman increased the cap by 50% to Rs. 4.5 lakh crore. On June 28, 2021, the minister said that 12 public sector banks, 31 NBFCs, and 25 private sector banks had distributed Rs 2.69 lakh crore to 1.1 crore units on behalf of the government.
Work in Progress for Rural India: The core of financial inclusion in India is Digital Financial Services (DFS). Digital illiteracy hinders the adoption of DFS in rural regions. Despite the government’s efforts to build a linked digital infrastructure, it directly impacts how well-liked digital products are.
Limited digital proficiency deters people from using e-banking services due to a lack of trust in technology, the inability to operate smartphones, and inadequate network access. Thus, cash is still the primary method of payment in rural India.
Tryst of COVID with the acceleration of digital finance adoption
Contactless digital payments can promote the social distancing policies put in place in several nations that aided in halting the spread of COVID-19.
Digital payments make it possible to complete transactions and provide financial aid to needy individuals. It is helpful when other disbursement methods become difficult due to health regulations.
Digital payment of public wages and other transfers (both G2P and G2B) is also more economical.
The ability to provide monetary assistance to households, in particular the unbanked, women, and the informal sector, is improved by digital payment systems. Aadhaar-enabled Payment Services (AePS), offered by businesses like Niyogin, are urgently needed by vast informal sectors in many emerging nations. As a result, these technologies can also speed up transfers, particularly useful in the COVID-19 situation.
To advance their vision of Digital India, the RBI recently established a new fintech department that focuses on innovation. This RBI department is taking proactive measures to solve the difficulties and roadblocks mentioned above.
For the growth of the businesses and the sector as a whole, leveraging collaborations with other fintech ecosystem participants to adopt new technology has become crucial. The future development of this sector will ultimately depend on regulation, cooperation and coordination.