Five financial changes to look for in 2022

The year 2022 may bring some good news to the savers. At the same time, costs for some of the bank customers who predominantly deal with cash can go up. There will be new technologies that will make your online transactions secure. Here are some of the changes that will take place in 2022.

Interest rates

Real returns to savers have been negative for more than two years as interest rates were kept low from the beginning of the pandemic. In the financial year 2020-21, average consumer price-based inflation was 6.22 per cent and for the current financial year, it is expected to be close to 6 per cent. On the other hand, peak fixed deposit rates offered by the banks is around 5-5.5 per cent.

At the same time, home loan interest rates are at multi- decade low, as many lenders are charging less than 6.5 per cent.

2022 may see interest rates starting to reverse the trend. Because the Reserve Bank of India(RBI) has been unwinding the ultra-loose monetary policy that is in force for the last two years. Liquidity has been tightened which has moved interest rates upward at the shorter end of the curve.

State Bank of India – the country’s largest lender – hiked base rate by 10 bps in December. Base rate is the erstwhile benchmark lending rate, to which all other rates were linked. Though a hike in base rate will impact only a few customers who are still in that regime, the indication is clear. Interest rates have bottomed out. They will only move up from now.

Higher ATM charges

From January 1, customers will be charged Rs 21, as compared to Rs 20 earlier, for transactions in automated teller machines, beyond the free transactions.

Customers are eligible for five free transactions (inclusive of financial and non-financial transactions) every month from their own bank ATMs. They are also eligible for free transactions (inclusive of financial and non-financial transactions) from other bank ATMs – three transactions in metro centers and five transactions in non-metro centers. Beyond the free transactions, customers will now be charged at Rs 21 per transaction.

One way to mitigate the hike in the charges is to increase dependence on digital modes of payments.

Card of file tokenisation

To make online transactions using debit or credit cards safer, the Reserve Bank of India has allowed only card issuing banks and the card networks like Mastercard, Visa, Rupay and others to store card data. All other entities in the payment chain will have to purge all previously stored data.

RBI had observed that availability of card details with a large number of merchants substantially increases the risk of card data being stolen.

Tokenisation is the process of replacing the debit and credit card numbers with a set of characters or tokens. This is mainly done for making the payments process more secure. Tokenisation is currently done by payment aggregators free of cost.

RBI has allowed card issuers to offer card tokenisation services as Token Service Providers (TSPs). The tokenisation of card data shall be done with explicit customer consent requiring Additional Factor of Authentication (AFA).

The deadline to meet the norms was 31 December 2021. After requests from industry players the deadline has been extended by six months, that is, up to June 30, 2021.

Tighter NBFC norms

With the shadow banks recording robust growth in the last few years, the banking regulator has now decided to tighten the supervisory norms for the non-banking finance companies.

“NBFCs have been growing in size and have substantial interconnectedness with other segments of the financial system,” RBI said while proposing prompt corrective action for non-banking financial companies, in the lines of commercial banks.

NBFCs will now face restrictions on certain activities like branch expansion, capital expenditure, dividend distribution if these entities breach certain thresholds pertaining to capital, bad loans and leverage. The PCA norms will be applicable to all deposit taking NBFCs (excluding government-owned), and all non-deposit taking NBFC in the ‘Middle, Upper and Top Layers’, RBI had said.

The PCA Framework for NBFCs will come into effect from October 1, 2022, based on the financial position on or after March 31, 2022.

New locker norms

The bank lockers norms were revised by banking regulator Reserve Bank of India, which was long overdue.

Firstly, the entire locker allocation process has been made transparent, as banks have been asked to maintain a branch-wise list of vacant lockers as well as a wait-list for the purpose of allotment of lockers.

In addition, RBI has said banks have the responsibility to take all steps for the safety and security of the premises in which the safe deposit vaults are housed.

Banks will have to pay the customer hundred times the annual rent of the locker, to the customer in case there is a loss of locker content due to theft, robbery, or fraud committed by its employees. The new norms have come to effect from 1 January 2022.

(The writer is a Mumbai-based journalist)

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