Reserve bank of India released its payment vision 2025 with an objective to provide every user with safe, secure, fast, convenient, accessible and affordable e-payment options. The activities to be taken up during the period up to 2025 as part of Vision 2025 are captured across five anchor goalposts of integrity, inclusion, innovation, institutionalisation and internationalisation.
The various initiatives under the goalposts have the following ten expected outcomes:-
The volume of cheque-based payments to be less than 0.25% of the total retail payments
More than 3 times increase in number of digital payment transactions
UPI to register average annualised growth of 50% and IMPS / NEFT at 20%
Increase of payment transaction turnover vis-à-vis GDP to 8%
The debit card usage would surpass credit cards in terms of value
Increase in debit card transactions at PoS by 20%.
Card acceptance infrastructure would increase to 2.5 crore.
Reduction in Cash in Circulation (CIC) as a percentage of GDP.
Increase in PPI transactions by 150%
Increase of registered customer base for mobile based transactions by 50% CAGR
In the document RBI emphasised about the increase in digital transactions happening in India. Over 26 crore digital payment transactions are processed daily by our payment systems, of which Unified Payments Interface (UPI) system processes more than two-thirds. Enhanced interest evinced by major countries across the globe in India’s UPI could accelerate growth in trade and commerce with partnering countries while reducing the speed and cost of remittances.
The vision document also include regulations for BigTechs and fintechs in payments; guidelines on payments involving “Buy Now Pay Later” (BNPL) services; introducing the central bank digital currency (CBDC); and linking credit cards and credit components of banking products to the Unified Payments Interface (UPI). The Reserve Bank of India will soon issue guidelines to make the digital lending ecosystem safe and sound as the BNPL services have developed into a new payment mode alongside the existing payment modes like cards, UPI, and net banking. This channel, facilitated by a few payment aggregators, leverages the existing nodal account (escrow account after authorisation) to route payments between a BNPL customer and a merchant.
According to CRISIL rating the increase in interest rate caused the borrowing cost for non-banking financial companies (NBFCs), including housing finance companies to rise by 85-105 basis points as their debt, amounting to Rs.18 trillion, gets repriced in the current financial year. As per CRISIL, as on March 31, 2022, Rs.15 trillion of outstanding debt is due for repricing this fiscal owing to interest reset or maturity. Another Rs.3 trillion of incremental debt is likely to be raised to support expected growth in lending.
Passing of interest rate to customers
In the home loan segment, NBFCs should be able to pass on the higher rates to both existing and new clients since lending rates here are primarily floating in nature.
Other segments such as vehicle finance, and micro, small and medium enterprises (MSME) financing, comprise fixed-rate loans majorly. So only incremental loans would be charged at higher interest rates and here, too, they won’t be as much as the rise in borrowing costs.
Profitability to remain steady
The overall profitability of NBFCs is likely to remain steady by a cushioned reduction in credit costs. The ratings agency suggested that credit costs, which have been rising for the past couple of years, should decline this fiscal year because most NBFCs hold substantial provisioning buffers. That should offset some of the impact of higher interest rates on profitability. Due to the improved macroeconomic conditions after COVID-19 pandemic a higher credit growth and disbursement is expected . As per the report, in addition to substantial provisioning, what will support the credit profiles of most NBFCs this fiscal is adequate liquidity and improved capitalisation.
India recorded WPI of 15.88% in May, highest since 2012
Increase in crude price and spike in prices of vegetables and fruits caused the wholesale price-based inflation to a record high of 15.88% in May. The surge in WPI is strengthening the possibility of a further interest rate hike by the Reserve Bank. Fitch Ratings too projected that the Reserve Bank would raise interest rates by 100 basis points further to 5.9% by December 2022 on a deteriorating inflation outlook.
Government to launch AI-Enabled Portal Bhavishya for Pensioners
The Department of Pension and Pensioners’ Welfare will launch an artificial intelligence-enabled common portal soon for the benefit of pensioners. The proposed portal will not only enable constant contact with pensioners and their associations across the country but will also regularly receive their inputs, suggestions as well as grievances for prompt response.
