The Union Budget 2025-26 has unveiled a series of measures that promise to impact Indian fintech. From streamlining KYC processes to bolstering digital public infrastructure, the Budget addresses critical pain points while unlocking new opportunities for innovation. The revamped Central KYC (CKYC) registry, expanded Fund of Funds for startups, and 100% FDI in insurance are among the standout announcements. These initiatives signal the Government of India’s intent to foster financial inclusion and technological advancement. Let’s explore this the Budget’s implications for fintech, highlighting key opportunities and challenges, while offering a roadmap for stakeholders to navigate this transformative phase.
1. Revamped CKYC Registry
The revamped Central KYC (CKYC) registry is a landmark move that promises to streamline financial onboarding. By standardising KYC norms and enabling seamless data sharing across institutions, the CKYC registry eliminates redundancies and reduces compliance costs. For instance, a customer opening a new bank account or applying for a loan can now use a single KYC record, saving time and effort. Fintechs, which often struggle with fragmented KYC frameworks, stand to benefit significantly. A digital lending platform, for example, can onboard customers faster, reducing drop-off rates and improving user experience. However, the success of this initiative hinges on robust data security measures and widespread adoption by financial institutions. Collaboration between regulators, fintechs, and traditional players will be essential to ensure smooth implementation.
2. DPI: The Backbone of Innovation
The Budget’s emphasis on Digital Public Infrastructure (DPI) applications remains important for fintechs. By developing DPI in areas such as credit, e-commerce, and MSMEs, the government is laying the groundwork for innovative solutions. For example, Digilocker integration with fintech platforms can simplify document verification, enabling faster loan disbursals. Similarly, DPI in logistics can facilitate supply chain financing, benefiting small businesses. The challenge lies in ensuring interoperability and scalability across diverse use cases. Fintechs must also address concerns around data privacy and user consent. By leveraging DPI, fintechs can drive financial inclusion while delivering seamless, user-centric experiences.
3. Fund of Funds for Startups
The expansion of the fund of funds for startups, with an additional ₹10,000 crore commitment, is a game-changer for the fintech sector. This fund, combined with the existing ₹91,000 crore corpus, will provide much-needed capital to early-stage fintechs. The inclusion of a new scheme for women, Scheduled Castes, and Scheduled Tribes entrepreneurs further underscores the government’s commitment to inclusive growth. However, fintechs must demonstrate sustainable business models to attract funding. Industry bodies like FICCI can play a pivotal role in mentoring startups and connecting them with investors, ensuring that the benefits of this initiative reach the grassroots.
4. 100% FDI in Insurance
The decision to allow 100% FDI in the insurance sector, up from the previous 74% cap, opens up new avenues for fintech collaboration. With foreign investors bringing in capital and expertise, fintechs can develop innovative insurance products tailored to India’s unique needs. For example, a fintech-insurtech partnership can offer micro-insurance products to low-income households, leveraging digital platforms for distribution and claims processing. The condition that premium funds remain in India ensures that the sector’s growth benefits the domestic economy. Fintechs must navigate regulatory complexities and build trust among consumers. Fintechs can and will play a pivotal role in expanding insurance penetration in India.
5. Customised Credit Cards for Micro-Enterprises
The introduction of customised credit cards for micro-enterprises registered on the Udyam portal is a significant step towards financial inclusion. With a ₹5 lakh limit and an initial target of 10 lakh cards, this initiative will empower small businesses to access formal credit seamlessly. For example, a street vendor can use these cards to purchase inventory or upgrade equipment, bypassing traditional loan application processes. Fintechs, with their expertise in digital onboarding and credit assessment, are well-positioned to partner with banks in rolling out this scheme. The success of this initiative also depends on robust financial literacy programmes to ensure responsible usage. The Union Budget 2025-26 has set the stage for a transformative phase in India’s fintech journey. Critical pain points such as KYC compliance, funding, and credit access have been addressed. The Budget has created a conducive environment for innovation and inclusion. The revamped CKYC registry, expanded Fund of Funds, and 100% FDI in insurance are particularly noteworthy. However, the sector must remain vigilant about challenges such as data security, interoperability, and financial literacy. As co-chair of FICCI’s fintech committee, I am optimistic about the opportunities ahead and committed to working with stakeholders to ensure that the sector realises its full potential. Lastly, I’d like to make the point that the returns on, and progress made with, DPIs must be tracked the same way we track physical infrastructure. After all, a new India will both.
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