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Below is View on RBI Monetary Policy by Vivek Goel, Co-founder and Joint Managing Director, Tailwind Financial Service Pvt Ltd

Huge push to digital payments as UPI gets linked to credit card

UPI has been a large part of the digital push that has transformed payment infrastructure in the country. As per Governor Shaktikanta Das, there are over 26 crore unique users and 5 crore merchants on the platform, making it the most inclusive mode of payment.

Till now, UPI was provided through linking of debit cards linked to savings accounts. With the latest announcement by RBI, it is proposed to be linked to credit cards starting with RuPay aimed at providing additional convenience to users and enhancing scope of digital payments. While the implementation timeline will have to be seen as banks and other stakeholders working with NPCI on the extent of changes required to enable the system.

As per RBI statistics, the number of credit cards issued is at ~75Mn. The overall impact on digital payments is expected to be significant as this opens up credit payments or short term loans on UPI payments as opposed to only the option of immediate debit from bank account under the current system.

MPC conservative in front-loading rate hike to keep inflation in check

Overall, the policy outcome was in line with expectations in terms of tightening stance and the same is expected to continue in the next policy in terms of rate hike. This is supported by the upward revision of inflation which has been a growing concern globally. Risks to projections remain as crude oil prices are projected at average $105 as opposed to current $120 levels as well as further impact from global supply shocks due to developments on the geopolitical front.

From a consumer perspective, this would imply an immediate impact on loans linked to repo rate which would be repriced faster, while other floating rate loans would also have higher interest as per their reset dates over the next 3 months. Consequently, gradually we can also expect that the deposit rates should start to be revised up over the next couple of quarters. On the bond yields side, 10Y G-sec yields were tracking lower immediately after the policy at around 7.45-7.46%

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