Describing RBI’s move as a stiff charge, Ajay Mahajan, president-financial markets, Yes Bank, said, "The view is that there is considerable amount of overheating of certain asset classes. The rise in the provisioning requirements will certainly result into a dent in the profitability of banks, wherein banks will suffer a one-time hit on their profits. It will also result into an increase in the cost of maintenance of certain asset classes and banks need to devise means to pass on the increase in the costs to their customers."

The increase in the provision requirements has been in the wake of the mounting concern on the banks’ huge exposure to such asset classes and higher default rates in regard to credit card receivables and personal loans. Vishal Goyal, head-research, Edelweiss, said, “The move is aimed at strengthening the banks’ balance sheets from adverse impact of huge exposure to risky assets. This may result in the slowing of incremental lending to the sensitive segments.”

The provisioning requirement in respect of residential housing loans has been kept unchanged at 0.4% for loans up to Rs 20 lakh and at 1% for loans in excess of Rs 20 lakh.

Meanwhile, the risk weights for all other categories of exposures has been kept steady. The apex bank has also maintained the provisioning requirements to agricultural loans, loans to small and medium enterprises (SMEs) and loans to industry remain unchanged to ensure smooth flow of credit to the productive segments of the economy.