Reserve Bank of India (RBI) governor Shaktikanta Das on 20th June said that the central bank’s timely action has moderated the growth of unsecured loans. In November 2023, RBI had hiked risk weights on unsecured credit and bank loans to non-banking financial companies (NBFCs).
Speaking at a conference held by the College of Supervisors (CoS), Das said the move on unsecured loans has resulted in a slowing of credit card outstanding loan growth from 30% year-on-year (y-o-y) in November to 25%, and a drop in bank loans to NBFCs from 30% level to 18%.
The central bank had hiked risk weight for bank lending towards consumer credit, including personal loan, from 100% to 125%; NBFCs’ consumer loans from 100% to 125%; credit card receivables risk weight from 125% to 150% and for NBFCs’ credit card receivable, from 100% to 125%. For bank lending to NBFCs, the risk weight has been increased by 25% over and above the risk weight associated with the given external rating in all cases where the risk weight as per external rating of NBFCs is below 100%.
As the financial sector gets increasingly digitised, adoption of advanced technologies like AI/ML and big data analysis can significantly bolster the ability of banks and NBFCs to respond to various risks.
However, it must be ensured that these technologies are secure, reliable and aligned with the institution’s overall strategic goals. “A vendor’s inability to deliver services reliably can directly impact the regulated entity’s operations and customer service. Therefore, a thorough due diligence becomes necessary before selecting third-party vendors,” the governor said.