Unsecured Lending

The collections of microfinance pools have declined to about 90 per cent in the third quarter of financial year 2025 (Q3FY25) from around 97 per cent at the beginning of this year

The RBI also noted that bank funding to non-banking finance companies (NBFCs) has declined following the increase in risk weight on bank loans to shadow banks

RBI Governor Shaktikanta Das discusses the difficulty in monitoring unsecured loans at the Business Standard BFSI Insight Summit

HDFC Bank remains unaffected by the industry-wide stress

This comes after RBI raised risk weights on unsecured personal loans

While the denominator effect played out over most of FY24, the need to recognise rising delinquencies, provide for them, and write them off has increased credit cost pressures since Q4 FY24

Their share was 27.3 in end-December 2023, according to central bank's data

RBI Governor Shaktikanta Das on Thursday said not acting on unsecured lending could have created a "bigger problem", and RBI's actions on such practices have had the desired impact of slowing down growth in the riskier segment. Addressing an international conference on financial resilience at the RBI's College of Supervisors here, Das said restrictions on unsecured lending were the result of a view that there could be a potential problem in the credit market because of growth in unsecured lending. The overall headline parameters were looking good, but there was "clear evidence" of dilution of underwriting standards, lack of proper appraisals and a mentality to join the bandwagon for driving up the unsecured lending among some lenders, he added. "We thought if left unattended, these vulnerabilities can become a bigger problem. So, we thought it is better to act in advance and slow down the credit growth," Das said. He expressed satisfaction that the RBI's action has had the desired

Over-reliance on unsecured lending and capital market funding can "bring grief" to non-bank lenders in the long run, Reserve Bank Deputy Governor Swaminathan J has cautioned. In an address to heads of assurance functions of non-bank finance companies at an RBI-organised conference on Wednesday, Swaminathan also warned against over-reliance on algorithms for taking lending calls. He also went public with the RBI's disappointment at the tendency of "misguided or intelligent interpretation" of rules to "circumvent regulations" and termed this as a "significant threat" to the financial system's integrity. The career commercial banker-tuned-regulator also flagged the risk limits for certain products or segments like unsecured lending are "way too high" to be sustainable in the long run. "There appears to be a fancy among most NBFCs to do more of the same thing, such as retail unsecured lending, top up loans or capital market funding. Over reliance on such products may bring grief at som

Recently, the RBI reiterated its concern on the elevated unsecured lending portfolio of banks in its Bulletin

There has been a rise in unsecured lending. The RBI has expressed concerns over lending practices

Meanwhile, SBI is evaluating if it needs more capital, Khara said. It's exploring raising capital through additional Tier-1 bonds after recently issuing Tier II bonds, he said

Deputy Governor Swaminathan J on Friday said the Reserve Bank wants the lenders to "curtail" consumption loans or unsecured credit, where the end-use is undefined. In the comments, which come within weeks of the RBI raising risk weights on unsecured lending to protect financial stability, Swaminathan clarified that the intent of the RBI is not to deny or ration credit. Replying to a question on whether fears of unsecured loans being used to punt on the equity market led the RBI to put some restrictions on unsecured lending, Governor Shaktikanta Das said the question is "very hypothetical" but admitted that there have been some anecdotal write-ups. " What we would like to curtail and expect the lending institutions to provide for more by way of additional risk weight, is some of those consumption-led segments or unsecured credit which do not have a defined end use," Swaminathan told reporters. He said, if there has been a recalibration of the growth number in such credit which sugge

Despite having the highest credit card portfolio in terms of retail assets at over 42 per cent, private sector lender RBL Bank does not see much impact on its margins after the RBI increased the risk weight on unsecured lending. Following a massive rise in unsecured lending and delinquencies, the Reserve Bank on November 16 tightened the norms for unsecured consumer credit, asking banks and NBFCs to assign a higher risk weight. As a result, it has increased the risk weight on unsecured consumer loans by 25 percentage points to 125 and to 150 for credit cards. This had analysts pegging the capital cost, on banks alone, going up at least by Rs 84,000 crore. "Our capital (CET 1 ratio) cost will go by 60 bps because of the RBI action, but the impact on our margin will be negligible at 1-2 bps only," the bank's chief executive and managing director R Subramaniakumar told reporters on the sidelines of the IBA-Ficci-organised national banking summit here on Wednesday. The bank's capital .

The note said the share of borrowers with more than five personal loans rose from 1 per cent in 2018 to 7.7 per cent in March 2023

Unsecured loans are on the rise, but the Reserve Bank is unlikely to put regulations to curb the same, a top official of India Ratings and Research said on Wednesday. The domestic credit rating agency, a part of the Fitch Group, feels there are no issues on asset quality as a result of the fast-paced growth in the portfolios as yet, its head for financial institutions Karan Gupta told reporters here. Gupta said most of the unsecured lending by banks is to salaried individuals, especially ones with whom banks already have a long relationship, giving them a look into cash flows while making the lending calls, he said, adding events like major job losses can hurt the asset quality. It can be noted that banks have been reporting very high growth in the retail unsecured books for the last few months, leading to concerns over its possible impact on asset quality. RBI's financial stability report also flagged the risk, pointing out that the credit card NPAs for state-run lenders is over 16

The RBI has instructed banks to limit their unsecured loan portfolios to the levels seen in FY23, a CEO of a private bank said

Home loans, the mainstay of retail lending, witnessed a dip in demand in the December quarter, a credit information company (CIC) said on Wednesday. However, there has been a 'marked increase' in demand for credit cards and personal loans, which constitute the more stressful unsecured loans portfolio for banks, Transunion Cibil said. The demand for unsecured lending products is being driven by the adoption of consumption-led credit products, the CIC said. Inquiry volumes for home loans for the three months ending December 2022 were 1 per cent lower than the year-ago period, while the same for personal loans and credit cards shot up by 50 per cent and 77 per cent, respectively, it added. From a loan origination perspective, home loans witnessed a 6 per cent dip by volume and 2 per cent by value in the December quarter against a healthy uptick in personal loans, credit cards and two-wheeler loans segment. It can be noted that the period saw a surge in interest rates, which led to ..

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The unsecured lending book for the bank includes credit cards and personal loans