To facilitate spending: UPI-credit link, real estate loans from rural banks

AS LOANS become costlier with rising interest rates, the Reserve Bank of India has tried to spur growth while simultaneously relieving consumers by trying to stimulate consumption of small, credit-driven items .

On Wednesday, the central bank decided to allow even credit cards to be linked to UPI (Unified Payments Interface). From now on, UPI could only be linked to savings accounts and checking accounts through users’ debit cards to facilitate transactions.

“It is now proposed to allow credit card linking on the UPI platform. For starters, RuPay credit cards will be linked to UPI. This will provide additional convenience to users and expand the reach of digital payments,” RBI Governor Shaktikanta Das said.

This decision will give impetus to the culture of credit for small items in both urban and rural areas. “This is a game-changer for the industry. It will significantly boost overall credit card spending and market levy. The neighborhood Kirana store, where credit cards have not been used until now , will now find it economical to accept credit card payments through UPI,” said Murali Nair, president of banking services at Zeta, a banking technology company.
“Linking Rupay credit cards to UPI will add more possibilities and convenience to customers,” State Bank of India Chairman Dinesh Khara said.

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In another measure that will generate jobs, make housing affordable and spur inclusive growth, the RBI has allowed Rural Co-operative Banks (RCBs) to finance residential real estate projects and doubled the limit on housing loans that Co-operative Banks can to offer.

The limits of Tier I and Tier II Urban Cooperative Banks have been revised from Rs 30 lakh to Rs 60 lakh and from Rs 70 lakh to Rs 1.40 crore, respectively. These limits were last revised for UCBs in 2011 and for RCBs in 2009.
For rural cooperative banks with a net worth of less than Rs 100 crore, the limits have been revised from Rs 20 lakh to Rs 50 lakh, and for other BCRs, the limits would increase from Rs 30 lakh to Rs 75 lakh.

The RBI has decided to allow RCBs – State Co-operative Banks and District Central Banks – to extend financing to commercial property – residential housing within the existing aggregate housing finance limit of 5% of their total assets. The move was taken in view of the growing need for affordable housing and to realize their potential by providing credit facilities to the housing sector, the RBI said.

Economists believe that the decision to increase the limit on housing loans for cooperative banks could lead to an increase in credit for their customers and thus will stimulate credit growth in small towns and semi-urban areas.

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