RBI has decided to increase the risk weightage regarding consumer lending. If any bank or NBFC distributes consumer loans, then the buffer reserve for the same has been increased by 25%. Due to this, personal loan will become expensive in the coming days.
The Reserve Bank of India has made a major change in the rules regarding distribution of consumer credit. The limit of the amount that has to be buffered by Scheduled Commercial Banks and NBFCs while disbursing consumer loans has been increased. Meaning, now the risk weightage for distributing consumer loans will be higher. Consumer loan will include personal loan. This will be applicable on both new and old loans. However, Home Loan, Education Loan, Vehicle Loan and Gold Loan have been kept apart from this. Risk weighting has been increased by 25%. This will come into effect with immediate effect. Due to the changed rules, personal loan will become expensive.
Risk Weight for Scheduled Commercial Banks
According to the rules issued regarding commercial banks in the notification available on the RBI website, the risk weightage for consumer credit i.e. consumer loan has been increased from 100% to 125%. This will be applicable on both new and old loans. Personal loan has been included in this. Housing loan, education loan, vehicle loan and gold loan have been kept separate.
Risk Weight for NBFCs
According to the rules issued regarding NBFCs, the risk weightage for consumer credit is 100%. Now it has been increased to 125%. This will be applicable to both new and old loans. This will include all types of retail loans. However, housing loan, education loan, vehicle loan, gold loan have been kept separate. In this, micro finance loans and loans distributed to self-help groups have also been kept separate.
Risk weight on credit card exposure
The risk weightage of scheduled commercial banks regarding credit cards is 125% and that of NBFCs is 100%. This has now been increased to 150% and 125%.
