New Delhi:
The Reserve Bank Of India (RBI) on Thursday tightened norms on unsecured loan portfolios of banks and non-banking financial companies (NBFCs) amid concerns over abnormally high growth in the credit categories.
Indian banks have seen a sharp rise in unsecured loans – mainly personal loans and credit cards – that have surpassed the overall bank credit growth of around 15% over the past year, drawing the attention of the Reserve Bank of India (RBI).
The RBI increased risk weights for banks and NBFCs (or the capital banks must set aside for each loan) by 25 percentage points to 125% on retail loans, the RBI said in a press release.
For banks, the new risk weight will apply to personal loans, and retail loans for NBFCs, the RBI said, adding that home, education and car loans, as well as loans backed by gold and gold jewellery, will be excluded.
The central bank on Thursday increased risk weights on credit card exposures by 25 percentage points to 150% and 125% for banks and NBFCs, respectively.
RBI Governor Shaktikanta Das said last month that the central bank was closely monitoring some fast-growing personal loan categories for signs of emerging stress.
Subsequently, Reuters reported that the RBI was particularly concerned about the rise in small personal loans of up to Rs 10,000 taken for three to four months.
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