Tuesday, February 11, 2025

Tax cuts for ‘Bank Mitras’, hike in kisan card loans limit in rural fintech’s budget wishlist

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With the union budget for the next financial year being prepared, rural-focused fintech companies are seeking tax support from the government for last-mile agents and business correspondents, popularly known as ‘bank mitras’.

In a letter sent to the finance ministry, the industry body Business Correspondents Resource Council (BCRC) has sought a uniform goods and services tax rate of 5% for BC transactions.

Currently the government levies no tax on accounts in rural branches and Jan Dhan accounts, but transactions through other accounts are charged at 18%.

ET has seen a copy of the letter dated January 10.

“Between 40 to 50% of the transactions through BC networks are done by migrant workers and others in urban areas and since their accounts are not maintained in rural area branches , they are not eligible for tax breaks , they end up paying 18% GST on their transactions which is on the higher side,” said BCFC chief executive Dharaindhar Tripathy.


Industry insiders pointed out that given the government’s concerns around financial inclusion, there needs to be a special focus on last-mile banking services. Around 85% of the enrolments in social security programmes like pension and insurance schemes are being done via BC service points, they said.

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The Confederation of Indian Industry (CII) in its submissions to the government during pre-budget meetings said that payment banks should be allowed to offer credit products since they cater to last-mile banking. The CII has also asked for charges to be brought back on merchant payments done via the Unified Payments Interface (UPI) network. The industry body believes that revenue generated via payment services will help in onboarding 250 million more Indians into the UPI ecosystem.In a report on the Indian Economy published earlier last year, Nabard said that rural per capita consumption expenditure shot up to Rs 3,773 in 2023 from Rs 1,430 the year before. According to industry insiders, the post-pandemic recovery of the rural economy needs support from the government for the growth momentum to continue.

Kisan Credit Card-based loans need a relook this year given the increasing costs in agriculture inputs, according to fintech firms.

“We are looking for the government to increase the Kisan Credit Card loan limit from Rs 3 lakh currently. The limit has not been revised for several years even as costs of farming have increased substantially,” said Vishal Sharma, cofounder and CEO of AdvaRisk, which provides collateral management services to banks and financial institutions.

Sharma pointed out that the rural economy needs farmers to do well and the government must facilitate easier flow of credit to enable farmers to generate higher income.



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