Reserve Bank of India (RBI) Governor Shaktikanta Das affirmed that the RBI has not initiated any crackdown on unsecured loans, clarifying that the recent actions taken by the central bank were pre-emptive in nature.
“It is not a crackdown, we saw some potential buildup of so we have acted pre-emptively,” Das said while speaking to Moneycontrol on the sidelines at a CII session on 'High growth, low risk: The India story' at Davos during the World Economic Forum Annual Meeting.
The central bank on November 16 announced an increase of 25 percent in the risk weight on consumer credit exposure for both commercial banks and non-banking finance companies (NBFCs).
The RBI clarified that the rise in risk weights for consumer credit exposure in commercial banks, covering both existing and new loans, includes personal loans. However, it does not apply to housing loans, education loans, vehicle loans, and loans secured by gold and gold jewelry, according to the RBI's statement.
For NBFCs, the higher risk weight is now applicable to retail loans, excluding housing loans, educational loans, vehicle loans, loans against gold jewellery, and microfinance/SHG loans.
Furthermore, the central bank has increased the risk weight on credit card receivables for scheduled commercial banks and NBFCs by 25 percent.
The central bank made this decision due to its worries about an unusual increase in specific consumer loans. RBI Governor Das had recommended that banks and NBFCs improve their internal surveillance mechanisms and address any potential risks.
Banking system resilient
Additionally, Das noted that the overall Indian banking system has successfully weathered significant global upheavals, beginning with the Covid-19 pandemic, followed by the repercussions of the Russia-Ukraine war. Many banks in advanced economies were grappling with severe challenges during this period.
“The Indian banking system emerged stronger out of this multiple crisis which we witnessed over the last few years,” RBI Governor said.
Das said all the performing parameters of Indian banking system today are very robust and there is a remarkable recovery on Indian banking sector.
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