The Reserve Bank of India (RBI) has proposed new curbs on 'revolving credit' products offered by Non-Banking Financial Companies (), potentially increasing risk weights on such loans.
25 percentage points
Risk Weight Increase (2023)
The Reserve Bank of India (RBI) is planning to impose new restrictions on 'revolving credit' products, such as flexible personal loans and credit cards, offered by Non-Banking Financial Companies (NBFCs). These proposed curbs are expected to involve increasing the **risk weights** on such unsecured consumer loans, meaning NBFCs will have to set aside more capital for them. This move is part of the RBI's ongoing efforts to temper the rapid growth in unsecured retail credit, which has been a concern for financial stability. It aims to promote more prudent lending practices among NBFCs and prevent a potential build-up of systemic risk due to high household debt, potentially impacting the availability and cost of such credit for consumers.
💭 If you're wondering…
NBFCs, or Non-Banking Financial Companies, are financial institutions that provide banking services without holding a banking license. They offer various services like loans, credit facilities, investment products, and wealth management, but cannot accept demand deposits or issue checks.
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