Growth of unsecured loans has moderated after RBI's timely action: Shaktikanta Das

RBI governor Shaktikanta Das

Reserve Bank governor Shaktikanta Das on June 20 said timely action on unsecured loans has moderated the growth of such loans.

"We thought it is better to act in advance and slow down the credit growth in these segments," the governor said.

He was speaking at the second global conference on financial resilience organised by the College of Supervisors in Mumbai.

Last year, the central bank increased the risk weight on consumer loans advanced by commercial banks and non-banking finance companies by 25 percentage points. The consumer credit of banks and NBFCs attracts a risk weight of 100 percent, which has been revised to 125 percent

The central bank’s action follows an October 6, 2023, statement by governor Shaktikanta Das flagging high growth in certain types of consumer loans and advising banks and NBFCs to strengthen their internal surveillance mechanisms, address the build-up of risks, and institute suitable safeguards.

On supervisors, the governor said they should be ahead of the build-up of a crisis and act on time. He further noted that RBI has a unique advantage and it is uniquely placed to use various arms of the central bank and to deal with any crisis.

“It is our endeavor to smell a crisis. Supervision has become a very complex task. We need to realise it is a complex world and our supervisory methods should be our best endeavour to remain sync with time. Not only in sync with times and to see stress before it builds up,” Das said.

On emerging new technologies, the governor said AI and ML can enhance predictive analysis and enable banks and non-banking financial companies  (NBFCs) to identify potential risks and trends more accurately.

He also pointed out that the central bank has no intention to constantly make regulatory changes unless required.

Meanwhile, Das also noted that the Indian financial system is now in much better position to what it was during the Covid pandemic.

Das further said that artificial intelligence (AI), machine learning (ML) can enhance predictive analysis and enable banks and NBFCs to identify potential risks and trends more accurately.

"These technologies can improve fraud detection by recognising unusual patterns and transactions in realtime. Thus, they can protect the institutions and their customers from financial crimes and frauds," Das said.