The RBI news update
RBI raised concerns about the rapid growth in unsecured retail loans and the over-reliance of NBFCs on bank funding, Governor Shaktikanta Das stated.He added that recent data indicates some moderation in these loans and advances.
To preempt potential risks in these segments, RBI increased risk weights on unsecured consumer credit and bank credit to NBFCs on November 16, 2023. As a result, credit growth in unsecured personal loans, such as ‘credit card outstanding,’ decreased from 34.2 percent in November 2023 to 23.0 percent in April 2024, while bank credit growth to NBFCs dropped from 18.5 percent in November 2023 to 14.4 percent in April 2024.
Governor Das emphasized that the boards and top management of regulated entities (REs) should ensure that risk limits and exposures for each line of business are maintained within their respective risk appetite frameworks. He noted that the persistent gap between credit and deposit growth rates calls for a reassessment of banks’ business strategies. A prudent balance between assets and liabilities must be upheld.
The Governor stressed that the RBI is vigilant about all aspects of the financial sector, particularly banking. Further measures will be implemented if necessary.
Deputy Governor Swaminathan J said the intention is to identify and communicate potential risk build-ups to regulated entities. The boards of REs have been asked to reevaluate and adjust their business plans in light of the widening gap between deposit growth and loan book growth to ensure long-term sustainability. He clarified that the RBI does not intend to micromanage business operations but will focus on the macro-level impact of any risk build-up.
