Navigate India's diverse landscape with IndiDNA

USA Finance Digest is your one-stop destination for the latest financial news and insights

Navigate India's diverse landscape with IndiDNA

RBI Strengthens Regulations for Personal Loans and Credit Cards Amid Increase in Requests

The Reserve Bank Of India (RBI) on Thursday tightened norms for personal loans and credit cards, raising the risk of slowing loan growth. The tighter rules will make such loans costlier and likely curb growth in these categories, which have outpaced the overall bank credit growth of about 15% over the past year.

The Reserve Bank of India has increased the risk weights for banks and non-bank financial companies (NBFCs), or the capital that banks need to set aside for every loan, by 25 percentage points to 125% on retail loans, it said in a statement. The new risk weight will apply to personal loans for banks, and to retail loans for NBFCs, the RBI said, adding that housing, education and vehicle loans as well as loans secured 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. The higher capital requirement will make these loans more expensive if lenders pass on the cost. If lenders choose not to pass on the cost, higher capital requirements will reduce margins and make such lending less attractive, leading to slower loan growth.

RBI Governor Shaktikanta Das said last month the central bank was closely monitoring some fast-growing personal loan categories for signs of stress, particularly concerned with the surge in small personal loans, and was considering tighter rules for such borrowings.

Unsecured personal loans increased 23% from a year ago as of Sept. 22, 2023, while outstanding amounts on credit cards jumped nearly 30%, central bank data shows. Data released by credit bureau Transunion CIBIL earlier this month showed that delinquencies, defined as loans overdue by more than 90 days, were at 0.84% for all personal loans. However, for loans below 50,000 rupees($600.66) delinquencies were higher at 5.4%.

The central bank was clearly seeing a build-up of risk and has decided to ask banks to build counter-cyclical buffers. Furthermore, the central bank has asked banks to set aside additional capital against loans to NBFCs, where the risk weight is currently below 100%, and to put in place board approved policies for exposure to different consumer credit categories.

Share this article
Shareable URL
Prev Post

Demands Immediate Action Nitish Kumar Urges Centre to Grant Special Status to Bihar Without Delay [ad_1] <!– –>Patna: Bihar’s Chief Minister stated that he will begin a state-wide movement if the Centre does not promptly grant special category status to the state.The JD(U) leader emphasized the importance of special status for the state’s progress, reiterating the long-standing demand for it.He expressed, “If the Centre does not grant special status to Bihar soon, we will launch a state-wide movement. The demand for a special status will echo across the state during the movement.”Those not supporting the demand were criticized for their lack of interest in the state’s development, as per Mr. Kumar.He also highlighted the recent passing of bills to increase the quota for deprived castes from 50% to 65% in government jobs and educational institutions, based on the caste survey conducted by the state government.Mr. Kumar outlined numerous welfare initiatives for economically weaker sections, indicating that the status would expedite the provision of benefits to these individuals within a shorter timeframe.He expressed confidence in Governor Rajendra Arlekar’s prompt signing of the bills related to reservation of vacancies, following which the implementation of these measures for the upliftment of socially, educationally, and economically backward sections of the society would proceed.The bills raised the quota for Scheduled Castes from 16% to 20%, scheduled tribes from 1% to 2%, extremely backward castes (EBCs) from 18% to 25%, and other backward classes (OBCs) from 15% to 18%.(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)Waiting for response to load… [ad_2]

Next Post

Inspecting Mohammed Shami’s Efficiency Towards Left-Handed Batsmen within the 2023 World Cup

Leave a Reply

Your email address will not be published. Required fields are marked *

Read next