Hello everyone, 

Welcome to the 72nd edition of The Pattern, a weekly newsletter where we dissect the latest rumblings from the world of finance, economy, and technology. Let's get started!

In an otherwise quiet week - the RBI came out with a bang by placing additional announcements on the sidelines of the monetary policy meeting. Even though the banking regulator kept the policy rates unchanged, it did announce a bunch of things that are bound to impact the FinTech space. 

Let’s take a look at each of these one by one. 

UPI gets stronger, smarter, and better

By this time, it’s cliche to repeat just how transformative Unified Payments Interface (UPI) has been for the Indian digital economy. However, the beauty of this beast is that it never says never. 

NPCI seems to have an endless product roadmap for the payments infrastructure and interface. And. It. Just. Keeps. Shipping. 

UPI is the face of India’s digital story but now it gets a voice too! The RBI announced that people will now be able to transfer funds to each other through just their voice over an AI-powered IVR line. This will be made possible through a number where an AI-enabled bot will help individuals finish transactions through just their voice. 

This solution was demonstrated recently at a conference and the experience was truly seamless and exemplary. Kudos! 

At the same time, UPI is also getting an offline boost. The payment mode’s less resource-intensive version – UPI Lite – will now also support offline payments in the absence of internet access. This will be achieved through near-field communication (or NFC) and will make it less burdensome for the banking infrastructure to process micropayments. 

 Moreover, even UPI Lite is getting an upgrade on the transaction limits. Earlier, the transaction was capped at Rs 200 - now, this limit has been expanded to Rs 500 while the total limit is retained at Rs 2,000 - same as other prepaid modes in offline mode. 

Banks get jitters (and circulars)

The UPI was the carrot, but now let’s come to the stick. The regulator has specified that banks and lenders must reset interest rates only after clear and precise communication to their customers. 

This comes in the light of many customers reporting extremely elongated tenures or blown up EMIs due to floating rate loans. Lenders, customers allege, had changed the interest rates unilaterally without due information or intimation. 

This has largely been felt in the home loans space where interest rates tend to rise and fall often with the policy transmission thereby leaving customers and borrowers little choice but to keep paying that EMI…for a little longer. 

The RBI has said that it’s now in the process of creating detailed guidelines to curb these instances. 

 “To address the issue, it is proposed to put in place a proper conduct framework to be implemented by all REs to address the issues faced by the borrowers. The framework envisages that lenders should clearly communicate with the borrowers for resetting the tenor and/or EMI, provide options of switching to fixed-rate loans or foreclosure of loans, transparent disclosure of various charges incidental to the exercise of these options, and proper communication of key information to the borrowers. The detailed guidelines in this regard shall be issued shortly,” the bank said in the notification. 

New protocols for lending 

If this wasn’t enough, the banking regulator is also in the process of developing a brand-new infrastructure for digital loans. This infrastructure will be API-based and help lenders and participants process loans instantly by enabling access to data from various public and private databases. 

The RBI is currently testing it and plans to roll it out to select participants in the coming months. Another OCEN? Time will tell. 

This is all from me this week. As always, leaving some interesting data and reading recommendations below. 

Reading list 

1. Sarkaari banks trump private peers in drawing fresh talent

2. RBI asks banks to set aside incremental CRR

3. Meet the tycoon who built a fortune by lending to low-income borrowers shunned by banks

4. Yes Bank is India’s most climate change-ready lender, and it still falls short

5. [ Watch]  How FinBox BankConnect helped Dhan onboard lakhs of users by analysing bank statements in less than 10 seconds 

Between the digits 

5-15: YES Bank scored 15 on a climate risk readiness assessment by Climate Horizons. Meanwhile, ICICI Bank scored just 5 and SBI scored 12. 

 6.5%: RBI projected growth in real GDP for India 

39%: Wilful defaults  rose by 39%  in just two years at Fino. The payments/small finance bank is now looking at lending cautiously. 

Thank you for reading. If you liked this edition, forward it to your friends, peers, and colleagues. You can also connect with me on Twitter  here  and follow  FinBox on LinkedIn  to never miss any updates.  

Cheers, 

Mayank

  All opinions expressed are my own and do not necessarily reflect the views of FinBox or its promoters.