Now, the danger weights on bank card exposures have been elevated by 25 proportion factors to 150 per cent and 125 per cent for banks and NBFCs, respectively.
The transfer comes inside a month of RBI Governor Shaktikanta Das flagging considerations over a excessive development seen in shopper credit score phase.
The Reserve Bank of India not too long ago tightened norms for shopper credit score because it requested banks and NBFCs to assign the next danger weight for unsecured private loans, a transfer geared toward making the lenders extra cautious on such advances.
The danger weight on unsecured shopper loans has been raised by 25 proportion factors.
A better danger weight signifies that lenders must put aside extra funds as a security web for shopper loans, which may make the such credit score costlier. In easy phrases, the next danger weight restricts banks’ lending capability.
The transfer comes inside a month of RBI Governor Shaktikanta Das flagging considerations over a excessive development seen in shopper credit score phase.
In the round, the RBI stated, “It has been decided to increase the risk weights in respect of consumer credit exposure of commercial banks (outstanding as well as new), including personal loans, but excluding housing loans, education loans, vehicle loans and loans secured by gold and gold jewellery, by 25 percentage points to 125 per cent”.
The same increase has been effected in case of bank card receivables, as per the round on ‘Regulatory measures towards consumer credit and bank credit to NBFCs (non-banking financial companies)’.
Now, the danger weights on bank card exposures have been elevated by 25 proportion factors to 150 per cent and 125 per cent for banks and NBFCs, respectively.
The financial institution credit score excellent to the non-public loans phase was Rs 48,26,833 crore at end-September, 2023, up practically 30 per cent over the identical month of 2022.
On financial institution credit score to NBFCs, the round stated the danger weights on such exposures of banks too has been elevated by 25 proportion factors (over and above the danger weight related to the given exterior ranking) in all circumstances the place the extant danger weight as per exterior ranking of NBFCs is beneath 100 per cent.
The RBI additionally requested all of the entities regulated by it to assessment their extant sectoral publicity limits for shopper credit score and put in place, if not already there, Board accepted limits in respect of varied subsegments beneath shopper credit score. “In particular, limits shall be prescribed for all unsecured consumer credit exposures,” the round stated.
Further, all prime-up loans prolonged by regulated entities in opposition to movable property that are inherently depreciating in nature, corresponding to automobiles, ought to be handled as unsecured loans for credit score appraisal, prudential limits and publicity functions.
Recently, RBI Governor Shaktikanta Das flagged the excessive development in sure parts of shopper credit score and suggested banks and NBFCs to strengthen their inside surveillance mechanisms, handle the construct-up of dangers and institute appropriate safeguards, in their very own curiosity.
The excessive development seen in shopper credit score and growing dependency of NBFCs on financial institution borrowings had been additionally highlighted by the governor in the course of the interactions with MD/CEOs of main banks and huge NBFCs in July and August, respectively.
