homefinance NewsUnsecured personal loan numbers within reasonable limits: RBI Governor Shaktikanta Das
Unsecured personal loan numbers within reasonable limits: RBI Governor Shaktikanta Das
RBI Governor Shaktikanta Das said that the RBI is closely studying this area and expects financial institutions to self-evaluate potential gaps and risks in their model-based lending practices.
Reserve Bank of India (RBI) Governor Shaktikanta Das on Thursday, January 11, said that banks and non-banking financial companies (NBFCs) have a certain management bandwidth to appraise loan applications and there are model-based lending. He added that unsecured personal loan numbers are not particularly alarming.
"They are within reasonable limits, even non-performing NPAs," he said speaking at the Mint BFSI conclave in Mumbai.
Das highlighted that some institutions lacked the necessary diligence to justify the significant loan growth in the unsecured personal loan segment.
"What came to our notice was there was exuberance build-up and FOMO approach with respect to unsecured personal lending. It was clear to us that this kind of loan growth was not sustainable going forward if we did not moderate it," Governor Das stated.
Taking a proactive stance, Governor Das explained, "Our approach is that we do not wait for the house to catch fire and then act—we acted to ensure there is no fire."
He urged banks and NBFCs to assess the robustness of their models for unsecured personal lending at the board and management levels.
Governor Das also expressed that the RBI is closely studying this area and expects financial institutions to self-evaluate potential gaps and risks in their model-based lending practices.
He emphasised the need for moderation and a careful approach to avoid a situation where the loan growth becomes unsustainable, leading to adverse consequences for the financial sector.
In November 2023, RBI also announced stricter norms for personal loans and credit cards in the form of higher capital requirements. The new regulations entail a 25-percentage-point increase in risk weights for banks and NBFCs, necessitating a higher capital requirement for each loan issued.
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(Edited by : Amrita)
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