The Reserve Bank of India (RBI) has introduced stricter norms for consumer credit, directing banks and NBFCs to assign a higher risk weight for unsecured personal loans. This move, aimed at addressing concerns raised by RBI Governor Shaktikanta Das about rapid growth in the consumer credit segment, could impact fintech lenders significantly.
Apart from increasing the cost of financing, the RBI’s action serves as a warning for lenders in unsecured personal loans to reassess underwriting thresholds. The risk weights for consumer credit exposure, including personal loans, have been raised by 25 percentage points to 125%, making lending in the unsecured segment more expensive for banks and NBFCs. Fintechs, particularly new-age lending platforms and the P2P industry, are expected to experience a more substantial increase in the cost of finance compared to NBFCs.
The risk weights for credit card exposures have also been raised by 25 percentage points to 150% for banks and 125% for NBFCs. While these measures may initially curb new credit issuance, there is a notable 29% YoY growth in credit card outstanding, indicating an increase in credit utilization. The regulations, however, exclude housing loans, education loans, vehicle loans, and gold loans.
By FCCT Editorial Team
, an independent military force, and allied militias in Sudan raped several dozen women and girls in West Darfur’s capital, El Geneina, and those fleeing to Chad between late April and late June 2023, Human Rights Watch said today. The assailants appear to have targeted people because of their Massalit ethnicity and, in some cases, because they were known activists.){kind=link}