I had the privilege, along with leading CEOs of the financial services industry, to meet Mr. Jaitley and suggest ideas for the upcoming budget. Here’s how the meeting went.
On December 15, I had the privilege of being part of a pre-budget discussion at the Ministry of Finance for the representatives of Banking and Financial Institutions in connection with the upcoming Union Budget.
The Finance Ministry had invited the top CEOs of the financial services industry in India, and in a fantastic progressive move, reflecting the energy in Start-up India, invitations had been extended to younger, innovative companies like BankBazaar. This gave us the unique opportunity to make policy requests from the perspective of new age innovators. The experience was empowering and it recognized the work of startups in India today.
The Who’s Who
This was a high-power meeting with the who’s who of the financial sector in attendance. On the administration’s side, we had the Honorable Minister of Finance Mr. Arun Jaitley, Ministers of State for Finance Mr. Pon Radhakrishnan and Mr. SP Shukla, the dynamic Finance Secretary Mr. Hasmukh Adhia, the RBI Deputy Governor Mr. N. S. Vishwanathan, and key leaders from the administration.
Among those representing the industry, we had Mr. Aditya Puri (MD, HDFC Bank), Ms. Chanda Kochhar (CEO & MD, ICICI Bank), Mr. Rajnish Kumar (Chairman, SBI), Mr. Uday Kotak (EVC and MD, Kotak Mahindra Bank), Shikha Sharma (MD and CEO, Axis Bank), Chandra Shekhar Ghosh (MD, Bandhan Bank), Rashesh Shah (Founder, IIFL), Jatinderbir Singh (Chairman, Indian Banks’ Association) and other industry luminaries.
The Government Listened
The invitees sat in two rows with the front row addressing the Ministry of Finance including the Honorable Finance Minister. Everyone had a chance to speak for a few minutes and were at times asked for clarifications on their requests. Then, they stepped back, and the ones at the back came forward to speak and engage with the administration.
When my turn came, they asked me to introduce the BankBazaar model. I explained that we are a marketplace that enables consumers to Paperless-ly access financial products including loans, cards, and Mutual Funds on the mobile phone. I mentioned that we have 230 lakh visitors per month and partner with 85 financial institutions. Our vision is that in future consumers will access financial products on their mobile in 5 minutes and mobile-based paperless delivery would be key to democratizing access to finance to every Indian citizen.
The Government of India has given tremendous impetus to cashless finance. The year 2017 was the year of cashless. With the readiness of IndiaStack, 2018 can be the year of paperless access to financial products. This is important as the RBI household committee report has said that household income can increase by 10% if consumers access the right financial products. By extension, an increase in household income can increase the GDP.
Our ask is for the Government of India to encourage paperless access to financial products which means
a) an increase in the monetary limit for PaperLess e-KYC via OTP which will remove the need to collect the physical copy of PAN/Passport
b) a push for widespread usage of e-Sign to sign documents digitally
c) a push for 100% paperless onboarding of accounts for all financial products including the adoption of e-NACH and DigiLocker technologies.
Mr. Jaitley and Mr. Adhia asked us questions on our suggestions. We could sense the government’s keen interest in our thoughts in the way everyone in the administration took down notes. It was pleasing to know we were being heard out at the highest levels of government.
What Was Asked
Here are some of the things that the finance industry requested from the government. These asks, if delivered during the upcoming Union Budget, will be to the benefit of citizens.
1 – Creating a separate tax exemption for term Life Insurance
Currently, the maximum tax exemption via Section 80C of the Income Tax Act is Rs. 1.5 lakh. The industry wants to encourage more people to buy term plans which will help them insure their lives adequately at low premium costs. The industry wants a separate exemption limit for premiums paid towards term insurance.
2 – Increasing the limits on affordable housing
Recently, interest rate subsidies on Home Loans have been provided to middle-income group households. For example, households earning between Rs. 6 and 12 lakh a year can claim a 4% subsidy on Home Loan amounts up to Rs. 9 lakh. Households earning between Rs. 12 and 18 lakh annually can receive a 3% subsidy on loans amounts up to Rs. 12 lakh. The industry wants these caps to be raised so that they’re in tune with the ever-escalating costs of property ownership in urban areas.
3 – Increase TDS limit for bank interest
The Tax Deducted at Source limit for bank interest should be raised from the current Rs. 10,000, especially as the limit of Rs 10,000 was last set in the year 1997. This will ensure more interest in hand for bank customers.
4 – Push UPI harder
The UPI is seen by the industry as a better alternative to POS machines. In the near future, a vast majority of Indians will be connected to the internet via smartphones. It would, therefore, be prudent to push UPI harder since it is highly scalable, cheaper than POS, and requires lesser maintenance.
5 – Bring FD taxation at par with debt Mutual Funds
Millions of Indians prefer to invest via the humble Fixed Deposit which, though safe and reliable, is highly tax-inefficient. So, if you’re in the 30% tax bracket, a 7% FD actually earns you 4.9% which wouldn’t beat inflation or aid wealth creation. And, therefore, the industry proposed to bring the taxation on FD returns at par with debt Mutual Funds, wherein an investor is taxed only upon redemption and if redemption is after three years, the tax is calculated on the long-term capital gains at 20.6% with indexation benefits, which significantly reduces tax outgo.
6 – BankBazaar’s demand for e-Sign and e-KYC
Readers of this blog would have read of my support for paperless onboarding via usage of e-Sign, e-KYC via OTP, e-NACH, and the tremendous reach and cost benefits of instant account opening via the mobile. This would have far-reaching consequences for financial inclusion in our country where a vast majority of Indians remain excluded from access to loans, insurance, and Mutual Funds for one reason or the other.
It was satisfying to be given the opportunity to make our case to the Government of India. We hope that these inputs would lead to regulatory reforms for paperless that are the need of the hour.