Search
RBI’s lens on rising unsecured loans in banking system
October 09, 2023
The Reserve Bank of India (RBI) advised banks on Friday to exercise caution with unsecured loans, which have grown significantly faster than the overall credit in the banking system.
“Certain components of personal loans are recording very high growth. These are being closely monitored by the Reserve Bank for any signs of incipient stress,” said RBI Governor Shaktikanta Das while announcing the review of the monetary policy.
“Banks and NBFCs (non-banking financial companies) would be well advised to strengthen their internal surveillance mechanisms, address the build-up of risks, if any, and institute suitable safeguards in their own interest. The need of the hour is robust risk management and stronger underwriting standards,” said Das.
Deputy RBI Governor Swaminathan J further explained that unsecured retail credit saw an “outlier” growth of 23 per cent in the past two years, compared to an overall credit growth of 12-14 per cent. He said no action in terms of an increase in risk weight is considered at this point in time and wants banks to act as the first line of defence.
“We have not announced any regulatory or macro-prudential measures at this time. We would expect banks, NBFCs, and fintechs to act as a first line of defence,” said Swaminathan.
According to RBI’s latest Financial Stability Report, advances for unsecured retail loans rose to 25.2 per cent in March 2023 from 22.9 per cent in March 2021. In contrast, secured loans saw a decline to 74.8 per cent from 77.1 per cent during the same period.
Important Links:
- 4-IN-1 Professional Diploma in Banking, Financial Services & Insurance (PDBFSI): https://ask.careers/courses/4-in-1-professional-diploma-in-banking-financial-services-insurance-pdbfsi/
- Mumbai: https://ask.careers/cities/mumbai/
- TSCFM: https://ask.careers/institutes/tscfm/
