The Reserve Bank of India (RBI) on November 16, 2023, notified regarding the regulatory measures towards consumer credit and bank credit to NBFCs with reference to the Governor’s Statement dated October 6, 2023.
The following measures have been stated:
• As per extant instructions applicable to commercial banks1, consumer credit attracts a risk weight of 100%. On a review, it has been decided to increase the risk weights with respect to consumer credit exposure of commercial banks (outstanding as well as new), including personal loans, but excluding housing loans, education loans, vehicle loans and loans secured by gold and gold jewellery, by 25 percentage points to 125%.
• In terms of extant norms, exposures of SCBs to NBFCs, excluding core investment companies, are risk weighted as per the ratings assigned by accredited external credit assessment institutions (ECAI)5. On a review, it has been decided to increase the risk weights on such exposures of SCBs by 25 percentage points (over and above the risk weight associated with the given external rating) in all cases where the extant risk weight as per external rating of NBFCs is below 100%. For this purpose, loans to HFCs, and loans to NBFCs which are eligible for classification as priority sectors in terms of the extant instructions shall be excluded.
• The REs shall review their extant sectoral exposure limits for consumer credit and put in place, if not already there, Board approved limits in respect of various sub-segments under consumer credit as may be considered necessary by the Boards as part of prudent risk management. In particular, limits shall be prescribed for all unsecured consumer credit exposures. The limits so fixed shall be strictly adhered to and monitored on an ongoing basis by the Risk Management Committee.
All REs shall endeavour to comply with the provisions in paragraph 2C(a) at the earliest, but in any case shall implement them by no later than February 29, 2024.
[Notification No. RBI/2023-24/85 DOR.STR.REC.57/21.06.001/2023-24]
