Repo Rate Hike By 50 Bps, RBI Allows Credit Card Linking With UPI

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Consequently, the standing deposit facility (SDF) rate stands adjusted to 4.65%; and
The marginal standing facility (MSF) rate and the Bank Rate to 5.15%.

What does the hike mean?

The Repo rate hike, which comes after a 40 bps hike in May, will force banks and non-banking finance companies to increase repo-linked lending rates and minimum cost of funds based
lending rates (MCLR) further.
The net result will be a further rise in equated monthly instalments (EMIs) of existing borrowers.
Moreover, new home, vehicle and personal loans will also become costlier. Analysts also say consumption and demand can be impacted by the Repo rate hike.

The central bank is likely to focus on interest rate hikes over the coming months in a relatively short tightening cycle to rein in inflation.
With inflation persisting beyond 6% and growth chugging along, the RBI’s policy panel was widely expected to hike policy repo rate by 40 bps in June and another 35 bps in August, analysts said.
The key thing is that RBI MPC is likely to exit ultra-accommodation by August and take policy repo rate to the pre-pandemic level of 5.15%.

The projections indicate that inflation is likely to remain above the upper tolerance level of 6% through the first three quarters of 2022-23, the MPC said.
This signals further rate action on the part of the RBI.
Inflation is now projected at 6.7 per cent in 2022-23, Das said.

The Reserve Bank Of India (RBI) has allowed linking of UPI with Credit Card.
However, this facility will be initially available for RuPay Credit Cards only.
Currently, UPI facilitates transactions by linking savings and current accounts through debit cards.
Users will soon be able to do UPI transactions by linking it with their Rupay Credit Cards.
RBI expects that this arrangement will provide more avenues and convenience to the customers in making payments through UPI platform.
“This facility would be available after the required system development is complete. Necessary instructions will be issued to NPCI separately,” the RBI statement said.
According to RBI, over 26 crore unique users and 5 crore merchants are onboarded on the UPI platform currently.
In May 2022 alone, 594.63 crore transactions amounting to Rs 10.40 lakh crore were processed through UPI.