The Reserve Bank of India (RBI) is closely monitoring incoming data on bank loans to unsecured segment and non-banking finance companies (NBFCs) to ascertain if more measures are needed to tame growth in these sectors, governor Shaktikanta Das said on Friday.
“We are closely monitoring the incoming data to ascertain if further measures are necessary. The boards and top management of lenders should ensure that risk limits and exposures for each line of business are kept well within their respective risk appetite framework,” he said.
The central bank had in November last year hiked risk weight on banks’ consumer credit and loans to NBFCs by 25%. The higher risk weights were introduced due to excessive growth in the unsecured retail loans and over-reliance of NBFCs on bank funding.
Consequently, credit growth in unsecured personal loans such as ‘credit card outstanding’ declined from 34.2% year-on-year (y-o-y) in November 2023 to 23% in April 2024, while bank credit growth to NBFCs declined from 18.5% in November 2023 to 14.4% in April 2024.
“It seems that the RBI is trying to signal that it stands ready to take further steps, if necessary, to moderate unsecured retail lending and over-reliance of NBFCs on bank funding to desired levels if previous steps taken do not achieve the desired impact,” said Shivaji Thapliyal, head of Research and Lead Analyst, Yes Securities. However, it is not exactly known what would be the levels that the RBI regards as appropriate in this regard, he added.
According to RBI data, banks’ consumer durable loans grew 13% y-o-y to Rs 23,713 crore as on March 2024,while other personal loans grew 21% y-o-y to Rs 13.86 trillion.
Overall unsecured loans—which includes credit card outstanding, consumer durables and other personal loans—grew 21% y-o-y to `16.67 trillion, lower than 26% y-o-y growth registered in November 2023.