For a cause

The Reserve Bank of India’s tougher rules for unsecured consumer loans were pre-emptive measure to reduce potential risks and preserve the resilience of the finance sector. “Do not wait for house to catch fire and then act,” RBI Governor Shaktikanta Das on Friday in his monetary policy statement. “Prudence at all times should be the guiding philosophy both for regulators, regulated entities.”
The RBI also said it has proposed to lay down a unified regulatory framework on web aggregation of loan products to better enhance transparency in digital lending. The banking regulator increased credit risk weight 25 percentage points to 125% on unsecured consumer loans for banks and NBFCs in November. The risk weight for credit card loans was raised to 150 by banks was increased to 150% and those by NBFCs were raised to 125%.
RBI’s Deputy Governor Swaminathan Janakiraman said the “effort was put over the previous 3-4 months by way of sensitising the players to put adequate control measures to ensure the risk build-up is avoided. As the market was not responding enough to that…. and bases of data, we have taken certain measures to strengthen the prudential measures that the regulated entities had to put in place.”