As 2023 draws to a close, banking customers can look back in satisfaction thanks to RBI’s many customer-centric initiatives during the year. From launching the UDGAM portal to help customers locate their unclaimed deposits, to directing lenders to return borrowers their property documents once the loan account is closed, to announcing many UPI-related innovations, the central bank was in action through the year.
On the other hand, the government’s flip-flop on tax collected at source (TCS) on credit cards kept cardholders on tenterhooks. Finally, the TCS was put on hold and cardholders heaved a sigh of relief. That apart, with some leading banks withdrawing select credit card benefits, many had to contend with fewer benefits.
This was also a year of acquisitions and mergers. In March 2023, Citibank sold its India consumer business to Axis Bank. While the merger of HDFC with HDFC Bank had no immediate impact on the former’s home loan customers, going forward their floating rate loans will get linked to the repo rate.
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Here’s recapping what 2023 brought for bank depositors and borrowers, cardholders and UPI users.
Revised bank locker agreements
Introduced in February 2023, the new agreements made banks liable for loss of locker items in case of any negligence on their part. Unlike before, banks could now be held responsible for up to 100 times the annual locker rent once customers signed the revised agreements with them.
UDGAM (Unclaimed Deposits Gateway to Access Information) portal
Launched by the RBI in August 2023, UDGAM is a centralised portal to help people track all their unclaimed deposits across different banks in one place. Before UDGAM, one would have to search for such deposits individually on each bank’s website.
TCS axe on debit and forex cards
Even as international transactions using credit cards escaped the TCS net, debit cards and forex cards came under its net. With effect from October 1, all foreign spends beyond Rs 7 lakh per year via any payment mode (except for credit cards) attract 20 percent TCS.
UPI going from strength to strength
This was a year of several UPI initiatives, each adding to the usefulness of this instant payment system. In February, the RBI and the Monetary Authority of Singapore announced the UPI- PayNow linkage, a real-time payment system for facilitating cross-border money transfer between India and Singapore.
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Then in June, after the RBI allowed linking of RuPay credit cards to UPI, many banks initiated this facility for their card customers. This was to offer customers ease of transacting via UPI along with enjoying card benefits. And then came the introduction of a credit line on UPI. Once approved by the bank, a customer can use his sanctioned credit line while making purchases using a UPI app. This is similar to how one uses the credit limit on a credit card.
Rupay forex cards
RBI allowed forex cards to be launched on India’s home-grown card network RuPay, giving overseas travellers yet another payment option. Though, compared to Visa and Mastercard, RuPay has a smaller acceptance globally.
Mastercard, Visa and RuPay introduce CVV-free online transactions
As the next step to card tokenisation (whereby a token is created instead of saving actual card details for making online transactions), card payment networks introduced CVV-free transactions. That is, you don’t have to enter the CVV repeatedly at a merchant website once you have tokenised your card.
Select credit cards lose benefits
Axis Bank introduced a few changes to its Magnus and Reserve credit cards, making them less attractive than before. These included hikes in the annual fee waiver threshold and removal of certain spend categories for earning reward points. HDFC Bank capped the reward points redemption for flight and hotel bookings at Rs 50,000 per month for its Millennia credit card.
Batting for borrowers
In September 2023, the RBI issued a directive to banks to return all property documents to a borrower once full payment had been made and the loan account closed. In case of delay (due to the bank) of more than 30 days from date of full payment, the bank would have to compensate the borrower at the rate of Rs 5,000 for every day of delay. In case of the original property documents getting lost or damaged, the bank would have to help the borrower with getting duplicate copies and also pay Rs 5,000 for each day of delay after the end of 60 days.
Repo rate pause in 2023 but home loan takers burdened by the earlier hikes
After raising the repo rate by 25 basis points (bps) to 6.5 percent in February, the RBI kept away from any further hikes. The February hike had been preceded by a 250 bps increase since May 2022. Home loan borrowers continued to bear the brunt of high interest rates during 2023.
Potential rate cut, unsecured loans in focus next year
Market-watchers expect rates to start inching downwards in the second half of calendar year 2024. “Speculation is always a dangerous game, but for now, I think the pause will continue. We have the ammunition, the growth and broader macros seem okay. Inflation, while not in the zone that RBI would have ideally liked, is not in an out-of-control territory either. We could see some rate softening towards the second half of 2024, if at all,” Kotak Cherry Managing CEO Srikanth Subramanian told Moneycontrol in an interview.
RBI’s BP Kanungo Committee released a report in June, which made several recommendations on how banks can improve their customer service standards. These included proposals on how to curb mis-selling of third-party products by banks, updating of banks’ model operating procedures for a hassle-free settlement of claims relating to deceased account holders, and use of (artificial intelligence) AI and machine learning (ML) for quick resolution of small-sum financial disputes. How these are implemented is something to watch out for next year.
As we enter 2024, one may see the impact of RBI’s tightening of norms for unsecured loans. “With the RBI applying the brakes on unsecured and small-ticket loans before asset quality worsen in this category, sub-prime borrowers may find it trickier to borrow as banks adjust to RBI’s higher risk weights,” says Adhil Shetty, CEO of BankBazaar.com.
He also expects co-branded credit cards to retain their popularity as banks and fintechs continue to collaborate on launching innovative products in times of shrinking rewards.
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