After cautioning lenders over the surge in unsecured personal loans for several weeks, the Reserve Bank of India moved in to make it costlier for banks and non-banks to lend to this segment by requiring them to set aside more capital.
The RBI increased the risk weight on consumer credit by a fourth, from 100% to 125%. This means that while earlier banks needed to maintain capital of Rs 9 for every Rs 100 they loaned, they will now have to keep Rs 11.25.
The regulator also increased the risk weight on credit card receivables and bank loans to NBFCs, whose risk weight is below 100%. This directive will increase the cost of bank borrowing for top-rated finance companies but will exclude NBFCs that lend to priority sectors like housing and small and medium enterprises.
The move will not affect home, auto or education loans, RBI said, but clearly expressed its displeasure at some of the loans that are being offered. While bank credit growth has increased by around 20%, retail loans have jumped 30%. Within this, credit card outstanding payment is estimated to have risen by around 30%. Banks have also been lending to non-bank finance companies that are offering unsecured and personal and consumer loans.