Fintech companies call for measures to ease liquidity

Financial technology, also known as fintech, is an economic industry composed of companies that use technology to make financial services more efficient. Fintech companies operating in the digital lending space are expecting measures in the Budget that will improve cash flow for Small and Medium Enterprises (SMEs).

The industry officials said that the steps to improve the liquidity position of the digital lenders, which have seen a significant rise in Cost of Capital in the past year will also activate the demand for credit in the digital lending space.

“Facilitating debt flow to SMEs through digital lending non banking financial companies (NBFCs) will help unlock capital for borrowers at the grass roots level,” said Gaurav Hinduja co-founder and managing director (MD) at Capital Float. The Amazon-backed NBFC, which tied up with Japan’s largest financial institutions Credit Saison. Online lenders which are betting big on the unsecured personal loan segment said deduction in income tax rates can improve the demand situation.

Increase in present income tax exemption limits should spur demand and consumption, providing a much needed stimulus. This year’s budget will continue with the momentum started with ‘Start-up India’ that enabled self-certification, income tax exemptions, rebate in filing patents for new companies. Post the Infrastructure Leasing and Financial Services (IL&FS) crisis, many digital lenders have seen an increase in their cost of capital in the past year by more than 150 basis points which has directly impacted the bottom line i.e. the net profits of the firms. Even many firms have seen a fall in debt flows from banks and traditional NBFCs.