No major concern on BOB's unsecured loan book, says top official

Bank of Baroda

Bank of Baroda (BoB) does not see any concern on its unsecured loan book, said Joydeep Dutta Roy, Executive Director, Bank of Baroda (BOB).

"Our unsecured loan book is only for existing customers. So its not so much of problem for us as," said Roy.

He added that the unsecured loan book of the bank has only existing customers.

"Our case is more like a stable where we know our customer base, have a track record of their account, and much more and we have cash flow of salaries so it is much more secured for us," said Dutta.

Also read: Banks see sharp growth in unsecured loans even after RBI caution

RBI's action

In the past few months, the Reserve Bank of India (RBI) has been cautioning banks and non-banking financial companies (NBFC) on aggressive lending to unsecured businesses. "We would expect, as the first layer of defence, the banks, NBFCs and fintechs, to take appropriate internal controls," Shaktikanta Das said at the October 2023 monetary policy committee (MPC), warning that the RBI will "examine" the aspect if it does not see action on it."

Additionally, the central bank, on November 16 raised the risk weight on consumer loans of banks and NBFCs by 25 percent on November 16. Earlier, banks attracted a risk weight of 125 percent and NBFCs 100 percent. After RBI’s latest move, the same will stand at 150 percent and 125 percent for banks and NBFCs, respectively.

In October, Moneycontrol reported that some of the top banks have increased their unsecured loan portfolios by as much as 30 percent in the July-September quarter.  They expect growth to continue in the unsecured segment, which includes microfinance, credit cards, personal loans and some retail loans, bank officials indicated.

The growth comes in the backdrop of concerns flagged by RBI over the surge in such loans and a reminder to strengthen their surveillance mechanisms.