Money & Banking

RBI enables banks to lend more to customers

Our Bureau Mumbai | Updated on September 26, 2019

Banks will be able to lend more to customers for buying consumer products such as mobile phones, home appliances, two-wheelers, and three-wheelers, with the RBI cutting the risk weight for consumer credit, including personal loans.

While credit card receivables have been excluded, what this cut means is that banks can offer consumer loans by setting aside relatively lesser capital. The RBI has cut the risk weight to 100 per cent from 125 per cent. This reduction in risk weight comes at a time when the consumers’ perception of the economic situation and the employment scenario has softened, according to the RBI’s Consumer Confidence Survey in July. In its Statement on Developmental and Regulatory Policies, issued on August 7, the RBI had said that guidelines on reduction in risk weight for consumer credit, except credit card receivables, would be issued by August-end. So far, consumer credit, including personal loans and credit card receivables, but excluding educational loans, attracted higher risk weight of 125 per cent or higher, if warranted by the external rating of the counterparty.

Published on September 12, 2019

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