- Bank loans to NBFCs will also attract higher provisioning
AFTER WARNING BANKS and non-banking financial companies (NBFCs) against a possible crisis in the unsecured loan segment, the Reserve Bank of India (RBI) has decided to walk the talk.
On Thursday, it raised the risk weights on personal loans, loans to non-banking finance companies and credit cards a move that is expected to lead to an increase in lending rates and slow down growth in these segments. The decision excludes home mortgages, education and car loans, and debt backed by gold.
The central bank hiked risk weight for bank lending towards consumer credit, including personal loans, from 100% to 125%; NBFCs' consumer loans from 100% to 125%; credit card receivables riskweight 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 riskweight as per external rating of NBFCs is below 100%.
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