RBI keeps close watch on stress in microfinance, credit card loans, says governor

The MFI sector has been facing issues concerning charging high interest rates in some pockets.

The Reserve Bank of India (RBI) is keeping a close watch on the emerging stress in microfinance (MFI) and credit card loans.

“There has been some recent commentary on the likelihood of stress build-up in a few unsecured loan segments like loans for consumption purposes, microfinance loans and credit card outstanding. The Reserve Bank is closely monitoring the incoming information and will take measures, as may be considered necessary,” Governor Shaktikanta Das said in his monetary policy address on October 9.

The MFI sector has been in the news with rising concern over lenders charging high interest rates in some pockets. The regulator recently highlighted this. The self-regulatory organisations for the sector have brought in norms like a cut in lending rates, and an extra layer of underwriting.

Spending on credit cards surged around 19 percent on-year to Rs 1.73 lakh crore in July, according to the Reserve Bank of India (RBI) data. On a monthly basis, however, it increased just by 9 percent. The spending stood at Rs 1.59 lakh crore in June 2024 and at Rs 1.45 lakh crore in July 2023. Out of the total Rs 1.73 lakh-crore credit card transactions, e-commerce payments have been highest at Rs 1.11 lakh crore. This was followed by a point of sale (PoS) expenditure of Rs 62,285 crore. E-commerce payment transactions rose 16 percent on a yearly basis, while PoS business surged 25 percent, data showed.

The Monetary Policy Committee (MPC) of the central bank has maintained the status quo on repo rate during the October policy meeting, opting to hold its steady, despite the US Federal Reserve's recent rate cut of 50 basis points. The repo rate stays at 6.50 percent. The RBI has changed the stance to 'neutral' from 'withdrawal of accommodation'.