On 30 December, 2019, the Central Board of Direct Taxes (CBDT) issued a notification which ordered companies whose turnover exceeded ₹50 crore to include the Unified Payments Interface (UPI) and RuPay debit cards as payment methods. It was a welcome step to expand digital payments in India. Along with the Reserve Bank of India’s (RBI) decision to allow recurring payments through these instruments, this notification is expected to help expand India’s user base for digital transactions. More importantly, the CBDT’s notification was prescient because virtual payments have turned out to be lifesavers for consumers during the country’s 50-plus day covid-19 lockdown.
Amenities like pay-television, telecommunications, insurance, e-commerce and utilities form the bulk of cash and digital payments in India. The Boston Consulting Group estimates that only 20% of people in India pay their utility bills online, and the rest prefer to settle them through cash. The recent RBI circulars that allow recurring payments on cards, wallets and UPI are a sign that the central bank sees subscription payments as a vehicle to increase digital transactions.
However, a close examination of the CBDT guidelines suggests that they might make e-payment methods unviable. A primary concern is the absence of a recurring payments option. Imagine, for instance, the plight of a utility or subscription service customer who has to enter a one-time password (OTP) at each billing cycle. There’s a risk that he might pay the bill after the due date has passed. As a result, the customer will have to cough up a penalty fee or face service disruption, both of which are undesirable. Service disruption, particularly in subscription industries such as streaming, cloud services, insurance and food delivery, can lead to high customer churn. Even under normal circumstances, consumers should not have to encounter hurdles while using these services. To expect them to do so during a lockdown would be unfair. On the contrary, a smooth consumer experience at this time becomes paramount to preserve loyalty and boost spending.
People are relying on digital services to help them cope with this unprecedented lockdown. During this period, streaming platforms reported a 20% increase in viewership. Television viewership has also increased by 37%, reaching 1.2 trillion minutes in the first week of the lockdown, according to the Broadcast Audience Research Council. There is stress, uncertainty and a sense that the current situation will be prolonged. Such scenarios only reinforce the belief that consumers should not have to jump through unnecessary hoops to pay for utilities or subscription services. The hurdle of entering an OTP, or scanning a Quick Response (QR) code after each billing cycle, makes the UPI and RuPay payments experiences cumbersome.
Another cause of concern is that procedural delays prevent stakeholders in the ecosystem from adopting the UPI and RuPay recurring infrastructure. A high failure rate of digital transactions only exacerbates the situation. In its report on deepening digital payments, RBI acknowledged that there is scope to reduce failure rates and recommended that payment system operators bring the rate of declined transactions down by 25% every year.
Historical evidence shows that it can take close to a year for ecosystem stakeholders to implement new technical specifications. Given the current covid-19 situation, subscription services may need an additional six months to a year to integrate these payment services so that they work efficiently for consumers.
The execution of UPI 2.0 is a case in point. In 2018, the National Payments Corporation of India announced an updated payments interface that allowed consumers to pre-authorize money to be paid later. But it wasn’t until mid-2019 that specifications were released to payment service providers (PSPs). Nine months later, UPI 2.0’s certification is still underway and PSPs are yet to implement it. As a result, the interface is still not ready to go live.
For merchants and payment service providers, such a scenario is far from ideal. Every hurdle—particularly the prolonged rollout of technical specifications—can affect their daily operations. Technology tends to outpace policy mandates consistently, and it is rare for governments to keep up with them. Since the convenience and importance of recurring payments is well established, it’s unclear why there is a delay in this particular instance.
In this context, the government would be well advised to direct a faster rollout of technical specifications. Stakeholders such as the regulator, National Payments Corporation of India , banks and payment service providers should work towards speeding up the development of UPI and RuPay recurring payment functionality.
This acceleration will aid new payment systems to go live faster and drive higher rates of adoption by consumers. Consequently, the volume of digital transactions by Indians, which stood at 1.45 billion in January 2020, will increase, which was also the intention of the notification issued by the Central Board of Direct Taxes.
Uday Kotak had once moved before the Bombay High Court in December 2018 against RBI’s diktat on promoter holding in banks.
Kotak Mahindra Bank Ltd.’s promoter Uday Kotak on Tuesday sold 56 million shares held by him in the bank for at least Rs. 6,913.75 crore through a block deal in an effort to reduce his stake in the bank to 26.1%, close to the promoter holding level allowed by the Reserve Bank of India.
RBI on 5 March placed Yes Bank under a moratorium sensing the bank’s near collapse and a systemic crisis
On 15 March, it had informed exchanges that the bank’s AT-1 bonds worth ₹8,415 crore will be written down to zero
Borrowers should remember that opting for moratorium doesn’t ease the cost of the loan and is just a deferment.
The adverse impact on the interest cost would be significant in case of big-ticket loans like loan against property or home loans.
The Reserve Bank of India (RBI) has extended the EMI moratorium period for three months from June to August in order to provide relief to those who are facing a liquidity crunch. Many customers have been anxiously waiting for the details on how they can avail of the extension on EMI moratorium. Will it be automatic for those who have already opted for EMI moratorium or they will have to apply for it again? Or those who haven’t applied for it earlier can they opt for it now? Most of the banks have come out with the details. Here is what you need to do in case you are a customer of any of these banks.
ICICI Bank
ICICI Bank customers can apply for the moratorium for June only right now. If you want to extend it further you will have to reapply for July and August. You need to apply five days before the date on which your EMI is due. If you apply within less than five days, your EMI may be deducted. However, you will be refunded the amount in the next seven working days if you apply for the moratorium in that month. The last day for applying for the moratorium for June is 24th. You can apply for the extension on the bank’s website or through links sent on email or SMS by the bank.
HDFC Bank
Even in the case of HDFC Bank, those who have opted for moratorium earlier will not get moratorium automatically, and will have to reapply for the extension on the bank’s website. You can choose for the moratorium for three months while the customers have been given the option to choose one month at a time. No action is required on the part of those who don’t want to apply for a moratorium. If the bank deducts the EMI before the person applies for a moratorium for the month of June, it will be refunded within five working days of acceptance of their moratorium request.
State Bank of India
SBI customers will receive an SMS from the bank on the registered number and they will have to reply ‘Yes’ within five days of receipt of the SMS.
However, borrowers should remember that opting for moratorium doesn’t ease the cost of the loan and is just a deferment.
“Borrowers availing of the moratorium will continue to incur interest cost during the moratorium, which will increase their overall interest cost. The adverse impact on the interest cost would be significant in case of big-ticket loans like loan against property or home loans with large loan outstanding and long residual tenure,” said Naveen Kukreja, CEO and co-founder, Paisabazaar.com.
“Hence, only those borrowers who are unable to service their existing loans due to liquidity or cash flow disruptions should opt for the loan moratorium. Others should continue to repay their loans as per their original schedule,” he added.
Most banks have come out with calculators, which can be used by borrowers to ascertain their cost before opting for it.
Though the details of the buyers and sellers were not known, the bank’s promoter Uday Kotak was expected to sell up to 56 million shares through a block deal today to reduce his stake in the bank to 26.1% to meet RBI regulations
Experts said smaller and weaker NBFCs have either not been able to raise money or have had to settle for less at higher rates
NBFC funding market has been improving since February but the covid-19 pandemic and Yes Bank bailout have raised costs for these firms
MUMBAI: Smaller and weaker non-bank financiers face more difficulty in raising debt compared to their peers with stronger parentage as risk aversion intensifies amid the covid-19 crisis.
India’s long-term foreign-currency credit rating was cut to Baa3 from Baa2, Moody’s said in a late evening statement on Monday
Traders in India are yearning for the central bank to backstop the rupee and sovereign-bond markets after Moody’s Investors Service cut the credit rating to the lowest investment grade.
