The change in ATM charges, new method for handling online transaction information or latest NBFC norms are some of the financial changes that a consumer can expect in the financial sector this year.
Automatic Teller Machine (ATM) charges for transactions more than set limit have been increased to Rs. 21 in India. The new rates were applied on January 1, 2022. Reserve Bank of India (RBI) says the reason for this increase to be the rising cost of ATM deployment, maintenance expenses, increased interchange fee and overall costs which are incurred by banks. The increase was announced on June 21, 2021 in a circular by RBI.
A customer has five free ATM transaction limit with a parent bank. The transaction limit for non- customers at a bank ATM is three or five times depending whether the machine is in a metro or non-metro centre.
There are around 2.3 lakh ATMs in India and the finance minister recently stated in the parliament that 47 percent of the ATMs fall in semi-urban and rural areas According to a survey there were 860 million active debit cards with 60 million active credit cards in India in 2020.
The earlier over-limit charge of Rs. 20 was issued in 2014. The interchange fee in banks were also increased in Aug, 2021 to Rs. 17 from Rs. 16 for financial and from Rs. 5 to Rs. 6 for non-financial transactions. Interchange fee is a charge that is paid between banks for accepting card-based payments.
A circular released by RBI states that file tokenisation will be implemented on all credit and debit cards from June, 2022.The earlier set date for this change was Dec. 31,2021 which was moved by six months due to pressure from the industry.
Under file tokenisation rule only card-issuing banks and card networks like Visa, Master Card, etc can store a consumer’s card information. All other payment chain entities have to clear the data stored with them and hence, the data will not be available with any third party. This is a move to make the transactions more secure and save consumer’s personal information.
Tokenisation is a process in which the 16-digit card numbers are converted to a unique number known as token.
Many third-party sites like Amazon and Zomato save customer’s card information for easy payments. According to RBI this makes the information vulnerable and thus, the bank has introduced tokenisation which will change the sensitive information to random numbers.
Merchant Payments Alliance of India (MPAI) and the Alliance of Digital India Foundation (ADIF) had expressed concerns over the readiness in the industry for tokenisation. After the announcement, they had requested the deadline to be moved from earlier Dec 31, 2021. Their press release stated that there were many operational challenges which would make it hard to switch to token based system.
The associations said in a joint letter that the regulation will affect banks, intermediary payment systems, and merchants. The letter stated that the merchants cannot begin testing and certification of their payment processing systems until banks and card networks have been certified and are live with solid interfaces for consumer solutions.
Locker room norms
RBI has revised the norms for bank locker rooms. The Central bank has made the process more transparent and asked the banks to maintain a branch wise list of occupied and empty lockers, along with waitlist.
The norms came in effect on Jan 1, 2022. It was notified by the RBI in Aug, 2021. RBI states the responsibility and accountability of the lockers are with the banks in whose premises the lockers are.
The notification also stated that the banks will have to pay hundred times the annual rent of the locker if the contents of the locker are compromised. This is not applicable in the case of natural calamities.
To ensure timely payment of locker rent, RBI has allowed banks to take a deposit for three years at the time of issuing a locker, known as Term Deposit. Banks should not ask for such deposits from current locker owners.
RBI has also allowed banks to break a locker following procedures if a customer hasn’t paid rent for three years. State-owned banks charge Rs. 2000 for a small locker and Rs. 4000 for a medium locker.
New and tighter norms will be enforced on Non-Bank Financial Companies (NBFC) on Oct.31, 2022 as announced by RBI. There will be many restrictions on the companies under these norms.
The key motive for these regulations is to resolve the collapse of NBFC sector as it will be a threat for the entire financial system. There are more than 10000 NBFC in India and they make up 25 percent of the banking sector. The largest borrowers of funds from the financial system are NBFCs. Many banks offer substantial fundings to NBFCs.
The guidelines state that the NBFCs will be divided into four groups depending on size, activity and perceived riskiness. The groups are known as Base Layer, Middle Layer, Upper Layer and Top Layer. Base Layer will have companies with assets less than Rs. 1000 crore while top ten companies will comprise the upper layer.
NBFC are companies that operate in the financial sector and provides certain bank-like services without having a banking license. Investment banks, mortgage lenders, market funds, etc are examples of NBFC. Bajaj Finance Ltd., Mahindra & Mahindra Financial Services Ltd., Muthoot Finance Ltd. are some NBFCs operating in India.
Some reports state that the values of NBFCs will increase this year owing to improved capital positions.
This year interest rates may see a reverse trend as RBI has relaxed its monetary policy. It has tightened the liquidity (the ease with which an asset can be converted into money) and there may be an increase in interest rates.
The interest rates have been low since the dawn of the pandemic and investors have not received good returns. Average price-based inflation was 6.22 percent for 2020-21. For the current year the inflation is expected to be at 6 percent. Fixed Deposit interest rates by banks also remained around 5-5.5 percent which was 5.5-7.98 percent in 2019.
During all this, consumers were also helped by the low interest on house loans which remained at 6.5 percent.
Now, owing to new regulations and improving economic conditions, the rates will go up. A report said that RBI might increase the interest rates this year which was unregulated due to the pandemic. Currently, State Bank of India increased its base rate by 10 base points.