RBI tightens norms for unsecured personal loans for banks and non-banking financial companies

The Reserve Bank of India has tightened norms for unsecured personal loans for banks and non-banking financial companies. RBI in a circular said that it has been decided to increase the risk weights in respect of consumer credit exposure of commercial banks, both outstanding as well as new, including personal loans. However it excludes housing loans, education loans, vehicle loans, and loans secured by gold and gold jewelry, by 25 percentage points to 125 percent.

The bank has also increased the risk weights on credit receivables by 25 percentage points to 150 percent and 125 percent for banks and NBFCs, respectively.

Recently, RBI Governor Shaktikanta Das had flagged the high growth in certain components of consumer credit and advised banks and Non-Banking Financial Companies to strengthen their internal surveillance mechanisms, address the build-up of risks, and institute suitable safeguards, in their own interest.

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