Fintech Leaders Seek Credit Reform, AI Support, Regulatory Clarity From Budget 2026

Union Budget 2026 approaches as India’s fintech sector undergoes a structural shift. AI has now become the backbone of digital lending in the country, with 90% of Indian companies operating in the banking, financial services, and insurance sector including AI in their strategy, according to a Scielo Brazil study. The rapid adoption prompted the Reserve Bank of India (RBI) to publish the Framework for Responsible, Explainable, and Ethical AI last year to help companies manage AI risks. 

Over the past decade, India’s financial ecosystem has steadily turned digital, with the government, through successive Union Budgets, supporting measures including digital public infrastructure, India Stack, Account Aggregator Framework, and regulatory sandbox, as well as expansion of credit guarantee schemes and increased capital expenditure

Budget 2026 is expected to reflect the industry’s evolving role in credit delivery, financial inclusion, and digital infrastructure. Industry stakeholders say the Budget offers an opportunity to deepen capital access for startups and MSMEs, strengthen responsible lending practices, and reinforce trust in India’s rapidly expanding digital financial ecosystem.

Competing in AI and Wealth Tech Innovation

A key expectation from the Budget is targeted support for fintech innovation, particularly in AI and wealth technology. 

Pranav Koomar, Founder and CEO of PlusCash, notes that India currently stands at a disadvantage in accessing risk capital compared to global peers, with AI investments in India significantly lower than in the US. “We know that we do not have enough risk capital to lead the AI race in fintech or in general,” Koomar tells AIM.

He suggests that regulatory sandboxes in collaboration with the Securities and Exchange Board of India, along with tax incentives for wealth tech startups, could accelerate innovation and give Indian firms a competitive edge. Such measures, he argues, will encourage experimentation while maintaining regulatory oversight.

Meanwhile, Cheruku Srikanth, founder and CEO of financial management platform Digital CFO, notes that AI-led financial management will reduce compliance risk. “Compliance risk in SMEs is rarely ‘intent risk’; it’s process risk—manual classification, inconsistent treatment, missed deadlines, weak evidence trails, and post-facto reconciliations. AI-led financial management reduces this risk at scale by shifting compliance from after-the-fact checking to at-the-point-of-transaction controls.”

Rethinking Capital for Startups And MSMEs

While previous Budgets expanded access to credit through government-backed schemes like the Credit Guarantee Scheme for Startups and Startup India Seed Fund, private-sector lending frameworks for startups remain fragmented and often misaligned with cash-flow realities.

Ankur Bansal, Managing Director at BlackSoil, emphasises that the Budget must acknowledge that India’s funding needs have moved beyond a purely equity-led model. While venture capital played a critical role in the early stages of the startup ecosystem, Bansal says the focus must now shift towards blended capital structures.

“What the ecosystem now needs is policy support for blended capital where venture debt and alternative credit work alongside equity,” he notes.

He adds that policy emphasis should be on execution over announcements, with frameworks designed to enable cash-flow-aligned, sector-specific credit. Stronger risk-sharing mechanisms, he argues, would help MSMEs and growth-stage startups access flexible, non-dilutive capital that supports sustainable scaling rather than short-term growth.

Sustaining Credit Growth Through Technology

Credit growth remains central to India’s economic momentum, particularly in retail and MSME lending. Joydip Gupta, APAC head at credit decisioning platform Scienaptic AI, says the challenge is not merely expanding credit, but ensuring that growth remains healthy and sustainable.

“Our aim should be to manage credit growth such that it keeps the economy going,” Gupta says. He points to the government’s continued emphasis on development spending and fiscal stability as key drivers for maintaining lending momentum.

At the same time, Gupta stresses the need to improve underwriting standards and loan book quality—an area repeatedly highlighted by the RBI. He notes that technology, particularly AI-driven analytics, can play a crucial role in enabling lenders to scale without increasing risk.

“By bolstering the digital lending infrastructure and facilitating analytics-driven credit appraisal, lenders can achieve rapid growth without incurring undue risk,” he says, adding that responsible AI adoption must remain aligned with regulatory expectations.

Strengthening Last-Mile Inclusion

As India continues to tread on the path of financial inclusion, fintech leaders say the Budget must also recognise the role of non-bank business correspondents and rural fintechs in enabling last-mile access to financial services.

These players form the backbone of assisted digital finance, supporting services such as Aadhar Enabled Payment System, mATM transactions, cash-in and cash-out facilities, and access to basic banking products in areas where physical bank branches remain limited.

“Rural fintechs, in particular, have played a critical role in building trust among underserved communities. As fintech participation expands across payments and core banking services, industry voices are calling for clearer regulatory frameworks to ensure transparency, accountability and consumer protection,” Dilip Modi, founder and CEO of rural fintech Spice Money, posted on LinkedIn.

Standardised reporting norms, robust grievance redressal mechanisms and clearly defined compliance requirements would help reinforce trust and stability across the ecosystem.

Cybersecurity Emerges as a Priority

Cybersecurity has also emerged as a pressing concern for the fintech sector, with the Indian Computer Emergency Response Team handling over 29 lakh cyber incidents in 2025. Over the past year, multiple wallet breaches and platform hacks have highlighted vulnerabilities in digital financial infrastructure, affecting both firms and consumers.

Industry leaders are calling for a dedicated Budget allocation towards cybersecurity for digital finance platforms, including shared threat intelligence frameworks and stronger safeguards.

“Budget 2026 should allocate a dedicated budget to cyber risk mitigation, shared threat intelligence, and stronger security standards. To enable real-time threat intelligence sharing and enforce uniform cybersecurity standards across fintech platforms, this Budget should institutionalise a government-level CISO framework,” Koomar says, adding that trust is foundational to sustained fintech adoption.

As fintech increasingly underpins credit delivery, payments and inclusion in India, the expectations for this year’s Budget reflect a broader call for policy that is pragmatic, execution-focused, and aligned with the realities of scale.