RBI Sees Moderation in Unsecured Retail Loans After Warning

Mumbai, Jun 7 (KNN) The Reserve Bank of India (RBI) has observed some moderation in certain unsecured retail loans and advances to non-banking financial companies (NBFCs) after raising concerns about excessive growth in these areas last November, Governor Shaktikanta Das said on Friday.

Addressing the Monetary Policy Committee's meeting, Das stated that recent data suggests a slowdown in the growth of unsecured personal loans, such as credit card outstanding, from 34.2 per cent in November 2023 to 23.0 per cent in April 2024.

Similarly, bank credit growth to NBFCs declined from 18.5 per cent in November 2023 to 14.4 per cent in April 2024.

The RBI had hiked risk weights on unsecured consumer credit and bank lending to NBFCs in November 2023 to preempt potential risks in these segments. The central bank continues monitoring the data to assess if further measures are necessary.

Das emphasized the need for regulated entities (REs) to maintain a prudent balance between assets and liabilities within their respective risk appetite frameworks.

He highlighted the persisting gap between credit and deposit growth rates, urging banks to re-evaluate their business strategies.

In addition to these steps, the RBI has proposed new guidelines on project financing, requiring lenders to set aside 5 per cent of outstanding exposures during the construction phase, up from the current 0.4 per cent. Once operational, the requirement will drop to 2.5 per cent.

These measures aim to ensure financial stability and mitigate risks in the banking sector, reflecting the RBI's proactive approach to monitoring and regulating the financial system.

(KNN Bureau)