Public sector banks seek relaxation on risk weight for NBFC loan purchases

Public-sector banks (PSBs) have sought a relaxation in risk weight for retail loans they will buy from non-banking financial companies (NBFCs) under a partial credit guarantee scheme backed by the government.

Banks have to set aside capital for loan exposures based on the risk weight linked to an asset class. 

Senior public-sector bankers said the government was finalising a scheme under which it would give a partial guarantee for losses on such loans. 

This is not a bailout package but a commercial arrangement to assistance. 

This scheme is backed by the government and risk weights should be lower for such loans. The pool would