RBI red-flags worsening asset quality in unsecured loans

Growth in personal loans moderates post regulatory measures

- SACHIN KUMAR

The Reserve Bank of India (RBI) has raised concerns over worsening asset quality in unsecured loans, even as the growth in personal loans has moderated following regulatory measures introduced by the central bank to curb their rapid expansion.

In the Financial Stability Report (FSR), the RBI flagged the sharp rise in write-offs among private banks, as a potential indicator of worsening asset quality in this segment and a weakening of underwriting standards.

Delinquency levels in consumer credit remained stable for banks and NBFCs. However, rising impairment was seen in the unsecured retail loan portfolios," it noted. "Moreover, upgradation is declining and slippage from SMA-2 to NPAs are on the rise," it said.