RBI's regulations on risk-weighted assets a wakeup call for fintech sector: KV Kamath

KV Kamath, NaBFID Chairman, views Reserve Bank of India's (RBI's) fresh regulations on risk-weighted assets as a crucial signal for the fintech sector. According to him, it's not a negative surprise but rather a wakeup call.

He emphasises that if actions are detrimental to the system or oneself, regulators must intervene, and that's precisely what occurred here — an alert from the regulator.

The Reserve Bank of India (RBI) has imposed stricter guidelines on consumer lending, mandating banks and NBFCs to maintain larger reserves and establish board-approved strategies to monitor exposure limits in this sector. This move comes subsequent to the RBI governor expressing worries about the rapid surge in consumer loans on various occasions, advising caution among lenders.

Kamath explained that the pace of growth in certain areas signaled a need for prudence.

Instances where borrowers were taking multiple loans and even seeking additional funding from other sources raised red flags. Moreover, he highlights the need for caution by observing the Net Interest Margins (NIMs) some NBFCs were maintaining.

For him, these were clear warning signs, and the RBI's tightening of requirements was a prudent move.

Kamath holds an optimistic outlook on the economy's growth at 7.5%, stating that it aligns with his expectations and is the result of a sustained momentum, not a stroke of luck.

He believes that economic growth thrives on demand, which is fueled by money and aspirations. The capacity to meet demands, invest, and borrow, if necessary, are crucial components falling into place, contributing to this growth.

Furthermore, Kamath sees this momentum as just the beginning. He anticipates the digital economy to commence and overlay onto this 7.5% growth.