‘Over-reliance on unsecured loans, capital market funding can be source of grief for NBFCs’

Over-reliance on unsecured lending and capital market funding can "bring grief" to non-bank lenders in the long run, Reserve Bank Deputy Governor Swaminathan J has cautioned.

In an address to heads of assurance functions of non-bank finance companies at an RBI-organised conference on Wednesday, Swaminathan also warned against over-reliance on algorithms for taking lending calls.

He also went public with the RBI's disappointment at the tendency of "misguided or intelligent interpretation" of rules to "circumvent regulations" and termed this as a "significant threat" to the financial system's integrity. The career commercial banker-tuned-regulator also flagged the risk limits for certain products or segments like unsecured lending are "way too high" to be sustainable in the long run.