RBI Orders banks and NBFCs to set aside increased capital buffers and enhanced risk applicable to both outstanding as well as credit card exposure.
By CROX Times Desk: Reserve Bank of India (RBI) on Thursday has tightened all the norms related to lending portfolios of non-banking financial companies amid high concerns about growth in the loan categories.
Indian Banks have witnessed a sharp rise in the demand for personal loans and credit cards that have outpaced the credit growth by about 15% over the past year, grabbing the attention of its regulatory body known as the Reserve Bank of India.
In a release, RBI stated that the banks and NBFCs need to set aside the capital for every loan by 25 percentage points on 125% of all retail loans.
This new risk weight will be applied only to personal loans of banks and to retail loans for NBFCs. Rest all the loans related to housing, education, vehicles, and jewellery will be excluded from this.
For credit cards, all the receivables of commercial banks attract a risk of 125% while that of NBFC attracts a risk weight of 100%. On a review, it has been decided that the risk weights on such exposures by 25% to 125% for SCBs and NBFCs respectively.
The RBI Governor Shaktikanta Das said that last month the central bank was keeping a close eye on the monitoring of personal loan categories and credit cards.
