Following the Reserve Bank of India’s announcement about increase in the repo rate by 35 basis points (bps) to 6.25 percent, industry leaders from Global PayEX, Jocata, Muthoot Finance, Zaggle and JARVIS Invest have shared the implications from Fintech, manufacturing, lending, and banking perspectives.
Narayan Ramamoorthy, Chief Revenue Officer, Global PayEx
“The move of RBI to increase the repo rate by 35bps to 6.25% is imminent and in line with the market expectation. The reduced increase in repo rate in comparison to the recent trends underlines Central Bank’s commitment to remain bullish on stabilizing economy, controlling inflation and supporting growth. The revised repo rate will push businesses to realign their strategy and prioritize working capital management by optimizing their operational and financial expenditures. It will be an opportunity for businesses to earn improved returns on their investments for treasury deposits. Moreover, the RBI’s focus on enhancing the scope of BBPS to a wider audience including all category of payments and collections for businesses and individuals will create an efficient, seamless and transparent payments experience. This will create a resilient payments ecosystem where businesses will be able to unlock the potential of their accounts receivables and address their working capital challenges through quicker payment reconciliation.”
Prashant Muddu, Managing Director and CEO, Jocata
“The cost of borrowing capital has been increasing steadily this year, but the need for front-loaded action is well known. I think RBI has delivered on the expected lines. We are at a point when the global economy is witnessing a synchronous episode of monetary policy tightening to combat deteriorating growth outlook, inflation, and fears of recession. We can expect retail and MSME loans to see repricing over the next three months as the reset begins to kick in. While MSMEs will have to brace for high rates, they can leverage the strength of their business and contribution to economic activity through GST filings and have a positive and easy consideration from banks to access capital. When layered with predictive analytics, GST filings can create significant scope for Banks to bring in solutions such as contextual lending or sachet loans that are affordable during periods of inflation. While inflationary pressures will continue to hit economic activity, banking on technology to ease temporary pains through innovative solutions can be a win for banks, especially for priority sector lending.”
George Alexander Muthoot, MD, Muthoot Finance
“Given the backdrop of continued geopolitical challenges on the global front, it is heartening to see RBI’s outlook on the Indian economy remaining resilient and drawing strength from strong macroeconomic fundamentals. With the world economy still marked by shocks, the RBI has announced the fifth consecutive hike in repo rate with an increase of 35 bps to 6.25%, along with a focused stance on withdrawal of accommodation. In line with our expectations, the RBI governor further retained the inflation projection at 6.7%, and lowered the FY23 GDP forecast to 6.8% from 7% earlier. However, driving the confidence from recovery seen in rural demand and rise in urban consumption, resilience in the agricultural sector, improvement in consumer confidence, traction in investment activity, we are optimistic about the broadening of economic activities which bodes well for demand for gold loans and pick-up in demand for credit. With rural demand recovering and strong improved consumer confidence, we believe that we will continue to witness the stability in gold loan demand and revival of credit demand. The RBI announcement on enhancing UPI by introducing a single-block-and-multiple-debits functionality will further lead to ease of making payments in e-commerce space and ease of making payments for investment in securities. Also, enhanced scope of Bharat Bill Payment System (BBPS) will deepen the access for individuals and businesses leading to faster access of funds and improved efficiency.”
Mr. Avinash Godkhindi, MD & CEO of Zaggle
“While the RBI continues to maintain its hawkish tone on inflationary expectations, RBI’s repo rate hike by 35 basis points was on expected lines. Despite the RBI slashing FY23 GDP projections from 7% to 6.8%, Indian economy remains resilient and is still among the fastest growing major economies in the world. The global environment remains challenging, however we are confident about India growth story given the relatively strong macro fundamentals, traction in investment activity, robust financial system, healthier banks and corporate India. Broader policymakers support to the Indian startup ecosystem is another positive.
The success of UPI has been outstanding and praised globally and UPI has emerged as one of the most popular retail payment system in India. RBI’s decision to further enhance UPI by introducing a single-block-and-multiple-debits functionality will further boost the digital payments infrastructure in the country. This will significantly enhance the ease of making payments in e-commerce space and building higher trust in transactions as merchants can be assured of timely payments while the funds remain in the customer’s account till actual delivery of goods or services. Further the RBI has enhanced scope of Bharat Bill Payment System (BBPS) to include all categories of payments and collections, both recurring and non-recurring in nature. With this, the platform has now become accessible to wider set of individuals and businesses who can now benefit with faster fund access and improved efficiency. This will make the entire payments experience transparent and will lead to robustness and growth of India’s payment infrastructure.”
Sumit Chanda, Founder and CEO, JARVIS Invest
“The 35bps repo rate hike was expected, however the RBI maintained its hawkish stance on inflation being sticky and the need to maintain its vigil on inflationary expectations. The RBI maintained CPI inflation level projection for FY23 at 6.7% while lowering the FY23 GDP projection to 6.8% from 7% projected earlier. The markets did not react to the news since the policy was in line with their expectations. India continues to be the fastest growing economy in the world, investment activity is gaining traction, rural demand is recovering, and corporate earnings have been good. Global commodity and crude prices have moderated recently, although the trajectory will be keenly watched. We continue to believe that India equity markets are poised to hit new highs. Good time to be invested in equities but stick to asset allocation.”
Shrihari Gokhale, Chief Operating Officer, Lentra
“In the last 2 years, India has experienced a lot of economic activity, supported by liquidity available in the banking system. However this also has the kept the inflation high. The current monetary policy action has been taken to reduce the risk of high inflation in the country. In today’s announcement, RBI announced the hike in repo rate by 35 bps to 6.25% which was an expected move towards making India’s growth more resilient. We could be at the peak of rate hikes. With this policy, the governor has kept the door open for a possible small hike of 25 bps in the next policy, which will have a significant dependence on global events and there could be a clear stop thereafter.”
Gaurav Chopra, Founder & CEO, IndiaLends
“It is reassuring to see that the RBI is not letting its guard down despite an improvement in inflation numbers. We understand that the regulator is walking a tightrope between managing inflation and growth. This phase of rate hikes should end soon. As a business, we continue to see robust demand and foresee the momentum to continue on the back of higher digitisation and consumer awareness.”
RBI also announced that the scope of BBPS is being enhanced to include all categories of payments and collections, recurring and non-recurring, and for all categories of billers (businesses and individuals).
Mr. Dilip Modi, Founder, Spice Money said on the same –
“Since its inception, BBPS has grown exponentially with 94.97 million value of transactions in November 2022 across categories like electricity, Fastag, DTH, Loan Repayment, Mobile Postpaid, LPG gas, among others. Within all these categories, loan EMI repayment has emerged as one of the significant use cases in rural India. BBPS’s success has resulted in an ever-expanding range of services that can be paid for using the system. We are delighted to see that the Indian government has recognised the potential of BBPS and has expanded its scope to all types of payments and collections, both recurring and non-recurring, as well as all types of billers (businesses and individuals).
The new enhancements will make the platform more accessible to a wide range of customers as well as businesses. The initiative will help individuals and businesses to make a plethora of payments through BBPS in a faster and more efficient manner. Bharat Bill Payment System has become an essential part of rural economy and will continue to have a significant impact in driving last mile connectivity in the coming years.”
RBI also announced significant development around Enhancements to Unified Payments Interface (UPI) – Processing Mandates with Single-Block-and-Multiple-
Mandar Agashe, Founder, MD, & Vice Chairman, Sarvatra Technologies ltd.
‘This is a welcome move. UPI has already witnessed tremendous adoption over the last few years. This new functionality of ‘single-block-and-multiple debits’, will enhance the ease of making payments in the e-commerce space. It will result in a ‘win-win situation’ for both merchants and the customers. The merchants will get assured timely payments, while the customers can pay by blocking the amount in their account, i.e. there is a commitment to pay but the actual amount will be transferred when the actual goods are delivered. In fact, we may see many customers who would prefer cash on delivery, use UPI mandates for payments, in the coming months. There will also be an increased ease while making investments in securities, including IPOs and purchase of securities in the secondary capital markets.’
Dr. Jasmin B Gupta, Co-founder & CEO, LXME said,
“With capabilities in UPI further enhanced by introducing single block and multiple debits functionality, making payments in e-commerce space and for investments in securities will become easy. The customer will be able to block funds in his/her bank account for specific purposes such as hotel bookings, purchase of securities, etc, that will be debited post service/product delivery. The value added feature will enable trust- building in the Person to Merchant and Merchant to Merchant transactions.
With expansion of scope of BBPS to include all categories of payments and collections, both recurring and non-recurring such as education fees, professional fees, tax payments, rent collections, etc. the platform will get higher adoption from individuals and businesses. An important step towards scaling up of the platform, thus ensuring transparent and faster payments experience.”
Rajesh Mirjankar, MD & CEO, Kiya,ai said,
“Indian businesses and individuals continue to embrace the digital economy with digital payments shifting from being ‘a convenient way of making payments’ to ‘an essential commodity’. The pandemic-induced lockdowns led to a surge in the usage of digital bill payment modes for all kinds of utilities including water, gas, electricity, telephone bills etc. The BBPS is a robust system that ensures a hassle-free bill payment solution. The RBI’s decision to enhance the scope of BBPS platform to include all kinds of payments and collections, both recurring and non-recurring, will ensure the accessibility of the platform to a wider set of audience including rural India. Besides, the regulatory body’s decision to enhance the capabilities in UPI by introducing single-block-and-multiple-debits functionality will improve the efficiency of making payments. The RBI as well as the government has been instrumental in encouraging the usage of digital modes of payment and these announcements will further boost financial inclusion in the country and shape up the future of payments ecosystem.”
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