Tougher unsecured loan norms preemptive move: RBI Governor

Mumbai, November 22

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RBI Governor Shaktikanta Das on Wednesday said the central bank’s tougher stance on unsecured loans earlier this month is a ‘preemptive’ move in the interest of sustainability.

Underlining that the banking system continues to be resilient and there is no immediate cause of worry for the system, Das advised lenders to be more cautious and spot any trend of risk building early.

Need to be cautious

While banks and NBFCs are showing good performance now, sustaining it requires concerted efforts. In good times like these, banks and NBFCs need to reflect and introspect as to where potential risks could possibly originate. —Shaktikanta Das, RBI governor

“We have recently announced a few macro prudential measures in the overall interest of sustainability. These measures are preemptive in nature, they are calibrated and targeted,” Das said, addressing the annual FIBAC event here.

Speaking to reporters after delivering the speech at the event organised by industry lobby groupings Ficci and IBA, Das said it is very early to speak about a sunset date for the newly introduced norms.

It can be noted that after asking lenders to be cautious, the RBI had increased risk weights on unsecured lending for both banks and non-banks earlier this month.

More capital will have to be devoted for such riskier loans by a lender which will result in higher buffers in case of any stress, and the move will also make personal loans and credit card borrowings dearer.

Das said the RBI has left out loans taken for vehicle and home buying, and also lending to small businesses because of the benefit to growth that such segments portend, and also added that the central bank does not see a possibility of stress building up in such segments. He asked lenders to strengthen their risk management practices and build additional buffers to face any situation if the business cycle turns adverse.