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Below comments on pre-RBI monetary policy expectations by Mr. George Alexander Muthoot, MD, Muthoot Finance 

We believe the RBI may keep a status quo on key policy rates, however the focus on fiscal consolidation in the recent Interim budget by the honourable Finance Minister, may give some headroom to the RBI to change stance to ‘Neutral’ from the current stance of ‘withdrawal of accommodation’. In the backdrop of recent tight system liquidity conditions, the industry will watch out for RBI’s communication and view on system liquidity. Amidst the slowdown in global economy, the resilience of Indian economy clearly stands out, and the Government focus on capex spending along with the RBI’s prudent monetary policy is likely to keep Indian economy on the steady growth trajectory, while keeping the demand conditions intact.

Gold linked credit line enabled via UPI

While banks offer credit line to companies like an overdraft, on similar lines, banks don’t have a small credit line product for a common man which can help address monthly short term finance needs and as a result the common man either keeps huge balance in savings account, or resorts to a credit card or a personal loan to meet immediate gaps in monthly finance needs. 

We believe that a ‘gold linked credit line via UPI’ will be ideal for common man. For this extending the UPI linkage (payment system) by NBFCs is the first requirement, and once this is allowed, gold loan NBFCs can extend a credit line to common man. Unlike a credit card, this product will work like a secured credit extended by NBFCs and also attract lower interest rate (of 12%-18%) as compared to a higher interest rate (of ~36%) on a credit card.

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