Finance Minister Nirmala Sitharaman weighed in on the Reserve Bank of India's (RBI) clampdown on the high rate of growth in certain sections of retail loans on November 23 and said that the central bank was aware of where the "thin line" lies.
"The RBI is conscious of where the thin line actually lies. They are red-lighting it now so that NBFCs (non-bank finance companies) or small finance companies don't go too far in their enthusiasm," Sitharaman said.
Also read: RBI's post-Diwali retail loan dampener – will higher risk weights hurt spending?
"Enthusiasm is good, but sometimes it becomes a bit too far for people to digest. So as a measure of caution, RBI has also alerted banks, small finance banks, NBFCs to be careful that they don't go too far too soon and face any downside risks later," she said at the Digital Acceleration & Transformation Expo in New Delhi.
Sitharaman's comments come a week after the RBI announced measures to temper the growth seen in certain categories of consumer credit, having flagged its concerns about the same in October. On November 22, Governor Shaktikanta Das advised banks and non-bank finance companies to be careful and ensure that credit growth - at all levels - remains sustainable and "all forms of exuberance are avoided".
"Expansion of the credit portfolio itself and pricing of the same should be in sync with the risks envisaged," the RBI governor said in a speech on November 22 in Mumbai.
Also Read: Fintechs may feel the heat as RBI moves to curb unsecured consumer loans
The finance minister also said that she has told public sector banks to focus on their core banking business - collecting deposits, lending, and making money from lending.
"...but do give enough returns to those who keep their savings with you," she added.
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