Davos 2024: Banks will react to RBI caution on unsecured loans, regulator watching trend closely, says Axis Bank CEO

Amitabh Chaudhry said the message from the RBI is that if banks are not going to watch the risk in the unsecured category, then the regulator might impose more controls going for in the future

Axis Bank's Managing Director and Chief Executive Officer Amitabh Chaudhry on January 16 said banks and financial institutions will react to the Reserve Bank of India (RBI) caution on unsecured loans, adding that the regulator is watching the trend in unsecured loans very closely.

"Regulator (RBI) is obviously signaling to the market that is careful, watchful, and we are also watching this space quite closely and a few are not going to bring down your loan growth," Chaudhry told Moneycontrol in an exclusive interview at the World Economic Forum in Davos.

Chaudhry further added that the message from the regulator is that if banks are not going to watch the risk in the unsecured category, then the regulator might impose more controls going for in the future.

"I think it's quite obvious and evident from the statements made by the RBI governor on a continuing basis over the last couple of quarters. So, I do expect that the banks will and institutions will react to it, "he added.

The RBI action

The RBI, on November 16, increased the risk weight on consumer credit from 100 to 125 percent in a bid to put a check on the rampant growth in unsecured loans in the banking system. Earlier, RBI Governor Shaktikanta Das over the surge in such loans, who reminded banks to strengthen their surveillance mechanisms.

“Banks and NBFCs would be well advised to strengthen their internal surveillance mechanisms, address the build-up of risks, if any, and institute suitable safeguards in their interest,” Das said at a press conference after the Monetary Policy Committee (MPC) meeting in October.

The Axis Bank CEO added that RBI also wants to ensure that the customer conduct is proper. "So with all the stuff is going on digital lending guidelines, and generally customer conduct," Chaudhry said.