What is RBI’s latest move to increase risk weight for lending about? | Explained
1 year, 4 months ago

What is RBI’s latest move to increase risk weight for lending about? | Explained

The Hindu  

The story so far: Seeking to rein in an observed rise in unsecured personal loans and credit cards, the Reserve Bank of India directed banks and non-banking financial companies to reserve more capital for risk weights. While presenting the monetary policy statement in October this year, Governor Shaktikanta Das had flagged concerns about the “high growth” in “certain components of consumer credit.” He advised banks and NBFCs to “strengthen their internal surveillance mechanisms, address the build-up of risks, if any, and institute suitable safeguards, in their own interest.” The governor said these were being closely monitored by the apex banking regulator for “any signs of incipient stress.” “The need of the hour is robust risk management and stronger underwriting standards,” he had said. Ratings agency Moody’s also put forth that higher risk weights are intended to “dampen lenders’ consumer loan growth appetite.” The unsecured segment, it adds, has grown rapidly in the past few years, exposing financial institutions to a potential spike in credit costs in the event of a sudden economic or interest rate shock. NBFCs face a “double-whammy” because of higher risk weights on their unsecured loans and on account of the bank lending mandates to NBFCs.

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History of this topic

NBFCs gain fresh momentum as RBI eases bank lending norms
Trending News
1 month ago

NBFCs gain fresh momentum as RBI eases bank lending norms

Live Mint  

The business environment is set to turn favourable for non-banking financial companies, thanks to two recent developments. A lower interest rate cycle benefits NBFCs relative to banks, as it erodes banks’ cost advantage from low-cost current and savings account deposits, allowing NBFCs to compete more effectively. Read this | Lower capital requirements for bank loans to NBFCs to ease funding …

Bajaj Finance, Shriram Finance, Cholamandalam & other NBFC stocks jump up to 6% after RBI eases risk weight norms
Top News
1 month, 1 week ago

Bajaj Finance, Shriram Finance, Cholamandalam & other NBFC stocks jump up to 6% after RBI eases risk weight norms

Live Mint  

Bajaj Finance, Shriram Finance, Cholamandalam Investment and other NBFC stocks jumped up to 6% in early trade on Thursday after the Reserve Bank of India lowered risk weights for bank finance to NBFCs and microfinance loans, a move that is likely to unlock more funds and boost credit. Both NBFCs and microfinance institutions have witnessed a slow down in their …

Lower capital requirements for bank loans to NBFCs to ease funding woes
1 month, 1 week ago

Lower capital requirements for bank loans to NBFCs to ease funding woes

Live Mint  

The Reserve Bank of India’s decision to ease rules on bank loans to non-banking financial companies has been driven by a slowdown in credit flow to these entities, which have been facing a funding crunch amid systemic liquidity deficit and rising asset quality stress in small-ticket and microfinance loans, analysts said. The central bank had in November 2023 hiked risk …

RBI eases lending rules for small borrowers and NBFCs. Here's what it means
1 month, 1 week ago

RBI eases lending rules for small borrowers and NBFCs. Here's what it means

India Today  

The Reserve Bank of India has eased the stricter loan rules for small borrowers and non-bank lenders at a time when the economy is showing signs of slowing down. The RBI has also put on hold its earlier proposals to increase the capital that banks must set aside for new project loans and the liquidity they need to maintain for …

RBI lowers risk weight of banks’ exposure to NBFCs
1 month, 1 week ago

RBI lowers risk weight of banks’ exposure to NBFCs

The Hindu  

MUMBAI The Reserve Bank of India has lowered the risk weight on the exposure of Scheduled Commercial Banks’ lending to non-banking finance companies and microfinance loans. The risk weight on the exposures was increased by 25 percentage points in 2023 in the case of NBFCs and on a review, the RBI decided to restore the risk weights applicable to such …

RBI reduces risk weights on bank loans to NBFCs, MFIs
Trending News
1 month, 1 week ago

RBI reduces risk weights on bank loans to NBFCs, MFIs

Live Mint  

Amid cries of deficit liquidity in the banking system and funding crunch for several small lenders, the Reserve Bank of India on Tuesday reduced the risk weights on bank loans to non-banking finance companies and microfinance loans. The RBI’s decision to roll back its November 2023 hike in risk weights for NBFC loans has been driven by the significant slowdown …

India’s RBI partly dials back strict loan rules for micro credit, non-bank lenders
1 month, 1 week ago

India’s RBI partly dials back strict loan rules for micro credit, non-bank lenders

Live Mint  

Feb 25 - The Reserve Bank of India has partially reversed tighter rules for bank loans to small borrowers and non-bank lenders, according to two separate circulars issued on Tuesday. The central bank had in 2023 increased the risk weights for banks and non-bank financial companies, or the capital that banks need to set aside for every loan, by 25 …

Budget 2025: Govt tries to strike a balance between credit and deposits
2 months ago

Budget 2025: Govt tries to strike a balance between credit and deposits

Live Mint  

The Indian banking and financial sector, though robust and well-capitalised, continues to face serious challenges linked to unsecured loans and global market volatility. However, unsecured personal loans and credit card defaults remain major stress points. Stress in retail loan continues The Reserve Bank of India's Financial Stability Report for December 2024 revealed that nearly half of personal loan and credit …

What RBI has in store for banks and NBFCs: New regulation, lens on unsecured loans
3 months, 1 week ago

What RBI has in store for banks and NBFCs: New regulation, lens on unsecured loans

Live Mint  

India's banks and non-bank lenders are set to witness a slew of regulatory and supervisory changes in the year ahead, as the central bank pushes ahead with its recent measures to strengthen the banking system. The Reserve Bank of India will consider removing prepayment penalties on floating rate term loans to small businesses; examine inter-linkages between private credit firms, banks …

Rising Defaults Among Retail Borrowers are Stressing India’s Top Banks
4 months, 2 weeks ago

Rising Defaults Among Retail Borrowers are Stressing India’s Top Banks

The Quint  

Given that India’s economic growth relies heavily on domestic consumption, any slowdown in lending could ripple through the broader economy, impacting sectors dependent on consumer spending. Moreover, as banks shift their focus from retail to secured loans to mitigate risks, small and medium enterprises could face reduced access to capital, hindering job creation and slowing down economic expansion. In October, …

RBI deputy governor urges banks to be prudent on lending to NBFCs
1 year, 3 months ago

RBI deputy governor urges banks to be prudent on lending to NBFCs

Live Mint  

Mumbai: Banks need to reconsider whether they want to be part of lending consortiums to non-bank financiers that have scores of other lenders – up to 40 at times – to improve their monitoring of borrowers' use of sanctioned loans, RBI deputy governor Swaminathan J said. The deputy RBI governor was responding to a question from SBI managing director Ashwini …

How RBI’s new regulations on consumer credit will affect fintech lenders
1 year, 4 months ago

How RBI’s new regulations on consumer credit will affect fintech lenders

Live Mint  

The Reserve Bank of India has tightened norms for consumer credit as it asked banks and NBFCs to assign a higher risk weight for unsecured personal loans. The move comes within a month of RBI Governor Shaktikanta Das flagging concerns over the high growth seen in the consumer credit segment. In the circular, the RBI said, "It has been decided …

RBI Governor Shaktikanta Das Says Strict Unsecured Loan Norms A Preemptive Move
1 year, 4 months ago

RBI Governor Shaktikanta Das Says Strict Unsecured Loan Norms A Preemptive Move

ABP News  

Shaktikanta Das, governor of Reserve Bank of India on Wednesday, said the tougher stance taken by the central bank on unsecured loans earlier this month is a "preemptive" move in the interest of sustainability. Das said the RBI has left out loans taken for vehicle and home buying, and also lending to small businesses because of the benefit to growth …

A ritualistic risk dance begins as the political stakes start to rise
1 year, 4 months ago

A ritualistic risk dance begins as the political stakes start to rise

Live Mint  

There are no prizes for guessing when it’s election time in India; the high-decibel festive atmosphere accompanying pre-election campaigning makes sure that polls never go unnoticed. RBI’s rear-guard action is aimed at minimizing risk from burgeoning unsecured personal loans advanced by both banks and non-banking financial companies. Interestingly, the higher risk weightage applies only to general purpose consumer credit and …

RBI Stricter Norms For Consumer Credit Unsecured Personal Loans To Hit Banks' Capital Adequacy By 60 Basis Points S&P Global Ratings Credit Card NBFC
1 year, 4 months ago

RBI Stricter Norms For Consumer Credit Unsecured Personal Loans To Hit Banks' Capital Adequacy By 60 Basis Points S&P Global Ratings Credit Card NBFC

ABP News  

The Reserve Bank of India’s decision to enforce stricter rules for consumer credit by increasing risk weight for unsecured personal loans is expected to affect banks’ capital adequacy by 60 basis points, S&P Global Ratings said on Friday. The banking regulator on Thursday assigned increased risk weights on unsecured personal loans, credit cards, and lending to nonbank finance companies by …

RBI tightens norms for personal loans and credit cards, raises capital requirements
1 year, 4 months ago

RBI tightens norms for personal loans and credit cards, raises capital requirements

Live Mint  

The Reserve Bank of India on Thursday tightened norms for personal loans and credit cards in the form of higher capital requirements. The new norms will make personal loans and credit cards costlier and may curb growth in these categories. The central bank has raised the risk weights for lenders and non-bank financial companies, or the capital that banks need …

Boom in risky loans may spur curbs on unsecured lending
1 year, 9 months ago

Boom in risky loans may spur curbs on unsecured lending

Live Mint  

MUMBAI : The Reserve Bank of India is likely to raise risk weights on unsecured loans by 10-25 percentage points to caution banks against unfettered lending under this category, bankers and analysts said. While risk weights are likely to increase, leading to more capital consumption, RBI will not raise it equally for all categories of unsecured loans, they said. View …

RBI issues draft guidelines for minimum capital requirements for market risk, here is all you need to know
2 years, 1 month ago

RBI issues draft guidelines for minimum capital requirements for market risk, here is all you need to know

India TV News  

The Reserve Bank of India has released draft guidelines for minimum capital requirements for market risk, as it aims to align banking regulations with Basel III standards. The draft guidelines outline separate classifications for securities included in banks' trading and banking books, which are subject to market risk and credit risk capital requirements, respectively. Interest rate and equity risk are …

RBI Announces Steps to Boost Credit Flow to Real Estate Sector
4 years, 5 months ago

RBI Announces Steps to Boost Credit Flow to Real Estate Sector

News 18  

In a bid to increase flow of credit to the real estate sector, the Reserve Bank on Friday rationalised the risk weightage to LTV ratio for all new housing loans sanctioned up to March 31, 2022. As per a notification issued by the RBI, new housing loans will attract a risk weight of 35 per cent where LTV is less …

RBI gives relief to big ticket loans of above Rs 75 lakh
4 years, 5 months ago

RBI gives relief to big ticket loans of above Rs 75 lakh

Deccan Chronicle  

In a bid to boost demand for high value home purchases and thereby the housing sector, the Reserve Bank of India on Friday allowed banks to only consider the Loan to Value Ratio while setting the risk weights for new home loans. The latest announcement regarding the home loan risk weights has done away with the requirement of factoring in …

Home loans to become cheaper, thanks to RBI’s latest move
4 years, 5 months ago

Home loans to become cheaper, thanks to RBI’s latest move

Live Mint  

To make home loans cheaper, the Reserve Bank of India on Friday said that it will rationalise the risk weights and link them to Loan-to-Value ratios for new housing loans sanctioned up to March 31, 2022. “Recognising the criticality of real estate sector in the economic recovery, given its role in employment generation and the inter-linkages with other industries, it …

RBI rationalises risk weights on home loans; big boost for real estate sector
4 years, 5 months ago

RBI rationalises risk weights on home loans; big boost for real estate sector

Live Mint  

The Reserve Bank of India on Friday has announced that it will rationalise the risk weights and link home loans to Loan-to-Value ratios for new housing loans sanctioned up to March 31, 2022. "In recognition of the role of the real estate sector in generating employment and economic activity, it has been decided to rationalise the risk weights and link …

Round-the-clock RTGS to rejig of home loan rules: What RBI had for you today
4 years, 5 months ago

Round-the-clock RTGS to rejig of home loan rules: What RBI had for you today

Live Mint  

The Reserve Bank of India left key interest rates unchanged on Friday but signalled more easing ahead to support an economy that it sees contracting 9.5 per cent in the current fiscal. Here's what the latest RBI MPC meet had for you, the consumer: 1) In a business friendly move, the Reserve Bank of India on Friday said that Real …

Thinking outside the box in these testing times
4 years, 5 months ago

Thinking outside the box in these testing times

Live Mint  

Glory comes not only for inventors but also for innovators. The monetary policy committee has decided to keep the rates unchanged, but use targeted funding for growth revival in some key sectors that have both backward and forward linkages with growth. The targeted funding of specified sectors under the targeted longer-term refinancing operations is a good move, as risk aversion …

RBI tweaks risk-weight norms to help high-value housing loans
4 years, 5 months ago

RBI tweaks risk-weight norms to help high-value housing loans

Live Mint  

MUMBAI: The Reserve Bank of India on Friday tweaked the risk-weight norms for retail housing loans, a move that reduces the amount of capital banks need to hold against large-ticket loans. “Recognising the criticality of real estate sector in the economic recovery, given its role in employment generation and the interlinkages with other industries, it has been decided, as a …

RBI rejigs home loan rules to boost real estate sector
4 years, 5 months ago

RBI rejigs home loan rules to boost real estate sector

Live Mint  

The RBI today rejigged rules for new home loans to boost the real estate sector. "In recognition of the role of the real estate sector in generating employment and economic activity, it has been decided to rationalise the risk weights and link them to LTV ratios only for all new housing loans sanctioned up to March 31, 2022," the RBI …

Bankers Join Issue with RBI Governor over Risk Aversion Comment
4 years, 7 months ago

Bankers Join Issue with RBI Governor over Risk Aversion Comment

News 18  

Heads of various public and private sector banks on Thursday sought to present a counter narrative on RBI Governor Shaktikanta Das warning lenders about the perils of extreme risk aversion in the pandemic-stricken environment where credit demand is on the wane. Soon after the governor spoke, Aditya Puri — MD & CEO of the country's largest private sector lender HDFC …

Coronavirus impact: NBFCs urge RBI to allow draw-down from reserves for provisioning
4 years, 10 months ago

Coronavirus impact: NBFCs urge RBI to allow draw-down from reserves for provisioning

Firstpost  

Non-banking financial companies on Friday requested the Reserve Bank of India to allow them to draw-down from their reserves for making additional provision for expected losses due to COVID-19 pandemic Mumbai: Non-banking financial companies on Friday requested the Reserve Bank of India to allow them to draw-down from their reserves for making additional provision for expected losses due to COVID-19 …

RBI lowers single, group borrower limit for urban cooperative banks
5 years ago

RBI lowers single, group borrower limit for urban cooperative banks

Live Mint  

The Reserve Bank of India on Friday lowered the single borrower and group exposure limit for urban cooperative banks to 15% and 25% of tier I capital, respectively, to reduce concentration risks arising out of such large loans. UCBs should have at least 50% of their aggregate loans and advances of not more than ₹25 lakh, or 0.2%, of their …

PMC Bank fallout: RBI proposes to tighten lending norms for UCBs, says exposure to single borrowers leads to credit concentration risk
5 years, 3 months ago

PMC Bank fallout: RBI proposes to tighten lending norms for UCBs, says exposure to single borrowers leads to credit concentration risk

Firstpost  

Earlier this month, the RBI Central Board had reviewed functioning of the urban cooperative banks and the enforcement framework. Mumbai: The RBI on Monday proposed reduction in loan amount an urban co-operative bank can lend to a single entity and a group of borrowers to 10 percent and 25 percent, respectively, with an aim to prevent PMC Bank like scams …

RBI increases banks' loan exposure limit to single NBFC from 15% to 20% of its capital base
5 years, 6 months ago

RBI increases banks' loan exposure limit to single NBFC from 15% to 20% of its capital base

Firstpost  

Banks’ exposure to a single non-banking financial company is restricted to 15% of their available eligible capital base Mumbai: The RBI on Thursday increased loan exposure limit of banks to a single NBFC from 15 percent to 20 percent of its capital base, a move that will help increase credit supply to the crisis-ridden shadow banking sector. According to the …

RBI external benchmark for bank loans credit negative: Moody's
5 years, 6 months ago

RBI external benchmark for bank loans credit negative: Moody's

The Quint  

Mumbai, Sep 10 Moody's Investor Service on Tuesday said the RBI's mandate on aligning commercial bank floating loan rates to the external benchmark from next month is credit negative for Indian banks. This will expose banks to asymmetrical movements in the cost of funding and loan yields, thus exposing them to interest rate risks," the US rating agency said in …

As RBI tries a Panglossian message, NBFC investors face a harsher reality
5 years, 7 months ago

As RBI tries a Panglossian message, NBFC investors face a harsher reality

Live Mint  

As messages go, Reserve Bank of India governor Shaktikanta Das gave a Panglossian one, expressing yet again the central bank’s resolve to help non-banking financial companies weather the crisis they are mired in currently. “Our discussion with market participants suggests that debt investors are keen to invest only in high-quality retail players, mostly with strong parentage, such as Bajaj or …

Bank can lend more to Non Banking Finance Companies
5 years, 7 months ago

Bank can lend more to Non Banking Finance Companies

Deccan Chronicle  

Mumbai: To enhance credit flow to the crisis hit Non Banking Finance Companies sector, the Reserve Bank of India on Wednesday announced a slew of measures. On the same lines, in order to boost consumption, the central bank also reduced the risk weights for consumer loans such as personal loans, auto loans to 100 per cent from 125 per cent. …

RBI cuts risk weight on consumer credit to 100%
5 years, 7 months ago

RBI cuts risk weight on consumer credit to 100%

Live Mint  

Mumbai: In a move that will help lower loan pricing in the unsecured consumer credit space, the Reserve Bank of India on Wednesday reduced the risk weight for all consumer loans, barring credit cards, to 100% from the prevailing 125%. Under the standardised approach for credit risk management, all unsecured consumer credit, including personal loans and credit card receivables, which …

RBI to have fresh look at NBFC supervision: All you need to know about what's ailing India's shadow banking sector
5 years, 9 months ago

RBI to have fresh look at NBFC supervision: All you need to know about what's ailing India's shadow banking sector

Firstpost  

Many large NBFCs have come under severe liquidity pressure, compelling them to bring down their reliance on commercial papers following series of default by group companies of IL&FS Concerned over the stress in the NBFC sector, RBI Governor Shaktikanta Das on Saturday said there is a need to have a fresh look at the regulation as well as supervision, and …

Federal Bank to avoid lending to lower-rated NBFCs, says Shyam Srinivasan
5 years, 10 months ago

Federal Bank to avoid lending to lower-rated NBFCs, says Shyam Srinivasan

Live Mint  

Mumbai: Kerala-based private sector lender, Federal Bank is now more cautious than ever on lending to the non-banking financial companies. Following the defaults and liquidity crunch in the sector, the bank has decided not to renew credit lines to low-rated NBFCs, managing director and chief executive officer Shyam Srinivasan said in an interview. To be sure, the bank’s total risk-weighted …

RBI eases norms for bank lending to well-rated NBFCs
6 years, 1 month ago

RBI eases norms for bank lending to well-rated NBFCs

Live Mint  

The RBI today eased norms for maintaining risk weights on bank lending to non-banking finance companies or NBFCs. With a view to facilitating flow of credit to well-rated NBFCs, it has now been decided that rated exposures of banks to all NBFCs, excluding core investment companies, would be risk-weighted as per the ratings assigned by the accredited rating agencies, in …

RBI allows restructure of defaulting MSME loans up to Rs 25 cr
6 years, 3 months ago

RBI allows restructure of defaulting MSME loans up to Rs 25 cr

India TV News  

Providing a sigh of relief to the troubled micro and small industries segment, the RBI on Tuesday permitted a one-time restructuring of existing loans that are in default but "standard" as on January 1, 2019, without an asset classification downgrade. Support for micro, small and medium enterprises was one among the contentious issues between the Reserve Bank of India and …

Lowering capital buffer detrimental to banks, economy: RBI
6 years, 3 months ago

Lowering capital buffer detrimental to banks, economy: RBI

Live Mint  

Mumbai: The Reserve Bank on Friday warned that with high bad loans and inadequate provisioning to cover the same, any relaxation in the regulatory capital requirement or risk-weights could be detrimental to banks in particular and the economy in general. The Basel III norms recommend risk-weights for various credit exposures, based on cumulative default rates and recovery rates observed internationally. …

RBI allows banks to provide partial credit enhancement of NBFC bonds
6 years, 5 months ago

RBI allows banks to provide partial credit enhancement of NBFC bonds

Live Mint  

Mumbai: The Reserve Bank of India on Friday allowed banks to provide partial credit enhancement to bonds issued by systemically important non-deposit taking non-banking financial companies registered with the RBI and housing finance companies registered with the National Housing Bank. They have sought relaxations of the National Housing Bank’s credit rating norms related to refinance, lowering of the criterion on …

RBI opens banking tap to ease liquidity crunch at NBFCs
6 years, 5 months ago

RBI opens banking tap to ease liquidity crunch at NBFCs

Live Mint  

Mumbai: The Reserve Bank of India on Friday incentivized bank lending to non-banking financial companies by easing liquidity norms and increasing the ceiling for lending to a single NBFC until 31 December. The central bank allowed banks to use government securities as level 1 high quality liquid asset equivalent to the bank’s incremental lending to NBFCs and housing finance companies …

RBI's move to cut risk weight, provisioning for home loans credit negative for banks: Moody's
7 years, 9 months ago

RBI's move to cut risk weight, provisioning for home loans credit negative for banks: Moody's

Firstpost  

RBI also has lowered the standard asset provisioning requirement to 25 basis points from 40. Mumbai: The Reserve Bank of India’s decision to lower the risk weights and standard asset provisioning on select housing loan sizes is credit negative for Indian banks, global credit rating agency Moody’s Investors Service said on Thursday. In its credit outlook report, Moody’s said: “The …

Managing risk in banks
8 years, 3 months ago

Managing risk in banks

The Hindu  

The Reserve Bank of India’s biannual Financial Stability Report has once again flagged the fact that risks to the banking sector remain worryingly “high”. There has been no perceptible improvement in the health of domestic banks, even six months after the RBI’s previous report had highlighted the sector’s high vulnerability on account of the increase in capital requirement and worsening …

Usha Thorat | Rejuvenating Indian banks
9 years, 8 months ago

Usha Thorat | Rejuvenating Indian banks

Live Mint  

The Reserve Bank of India’s Financial Stability Report 2015 has highlighted the risks to growth arising from the weakness in the financial sector despite favourable macroeconomic factors. The report has estimated that under a severe stress scenario public sector banks may record the lowest capital to risk assets ratio of about 10.2% by March 2016. Weakened credit underwriting criteria in …

RBI tightens NBFC norms, tougher rules for deposit-taking companies
10 years, 4 months ago

RBI tightens NBFC norms, tougher rules for deposit-taking companies

India TV News  

Mumbai: In the wake of public investors increasingly being defrauded in the name of non-banking financial services, RBI today tightened its norms for NBFCs by requiring them to have a much stronger capital base, failing which they would lose their registration. The NBFCs would be subjected to a stronger set of rules and regulations if they raise public deposits, RBI …

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