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Four changes in India’s banking landscape in December

From the launch of the retail digital rupee and a likely increase in the repo rate to a new rule to calculate the minimum amount due on credit cards, a lot is happening in December. Here’s what to watch for.

December 01, 2022 / 12:39 PM IST
Representative image.

Representative image.

The Reserve Bank of India will introduce the much-awaited retail digital rupee on December 1 as a pilot programme in a closed-user group.

Then, if you have a loan or plan to take one, if you have a credit card, or if you subscribe to SMS alerts from a bank, there are important changes coming up in December that you need to monitor.

Retail digital rupee

The pilot programme for the retail digital rupee (e₹-R) starts on December 1 for a closed user-group of customers and merchants in select locations. The RBI has identified eight banks that will participate in this pilot. The first phase will begin with State Bank of India, ICICI Bank, Yes Bank and IDFC First Bank in Mumbai, New Delhi, Bengaluru and Bhubaneswar.

The e₹-R is in the form of a digital token that represents legal tender. It will be issued in the same denominations as bank notes and coins and distributed through banks.

Users can transact with e₹-R through a digital wallet offered by the participating banks and stored on mobile phones/devices. Transactions can be both person to person (P2P) and person to merchant (P2M). Payments to merchants can be made using QR codes.

The pilot programme is aimed at testing the robustness of the entire process of digital rupee creation, distribution and retail usage in real time.

Another rate hike?

The RBI’s next monetary policy announcement is scheduled for December 7.

The Monetary Policy Committee has been trying to control inflation by increasing the repo rate, currently at 5.90 percent. The RBI has increased the rate by 190 basis points since May, but inflation has not shown signs of cooling. One basis point is one-hundredth of a percent point.

The MPC’s target is to keep inflation under 6 percent, but it has failed to do so in the past three quarters.

Economists said interest rates have not peaked and they expect a repo rate hike of 25-50 bps in December.

However, it is also widely believed that the interest rate hike cycle might be coming to an end and that is also why this is a good time to enter medium to long-term debt mutual funds.

If there is another rate hike, banks will once again increase interest on home loans and other loans linked to the repo rate as an external benchmark, as per the terms of loan agreements.

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Minimum due on credit cards

In October, the RBI asked banks and card issuers to compute the minimum amount due on credit cards in a way that does not burden cardholders with higher payments and debt. According to the new rule, credit card issuers need to set a minimum amount due that is high enough so that the outstanding balance can be repaid over a reasonable time period.

HSBC Bank said effective December 1, the minimum amount due on its credit cards will be the sum of 5 percent of the total payment due and the greater of the past due amount and over-limit fees (if any).

The past due amount is the sum of minimum payments missed, plus the late fees added to your account since the last payment due date.

Banks charge over-limit fees if you exceed the spending limit on a credit card. HSBC Bank charges Rs 500 per month if you exceed the credit limit.

No SMS balance alert

Yes Bank will stop offering subscription-based SMS alerts from December 1. The bank used to offer subscription-based SMS alerts for account balances, debit and credit transactions and salary credits. These will all be discontinued. The SMS alerts are being halted because of a rise in frauds and data theft through messages.

However, account holders who want to continue getting such alerts must register or modify their subscriptions through the bank's online facility and customise the messages they want to receive.

Alternatively, they can check their balance, debit and credit transactions online.
Hiral Thanawala
Hiral Thanawala is a personal finance journalist with 9 years of reporting experience. Based in Mumbai, he covers financial planning, banking and fintech segments from personal finance team for Moneycontrol.