Personal loan Interest Rate: The Reserve Bank of India strengthened its regulations on personal loans on Thursday, making them more stringent for banks and non-banking financial firms (NBFCs). The risk weight has been raised to 25% under the updated norms. RBI stated that it has been determined to raise the risk weight with respect to the risk in the loan case based on the review. As a result, the risk weight for banks and NBFCs has been raised by 25% to 15% and 12%, respectively, by the RBI.
Certain Consumer Loans Spared from New Regulations
Nevertheless, some consumer loans, such as those for homes, education, and cars, will be exempt from the new regulations. Aside from that, debts secured by gold and gold jewellery will not be subject to this law. For these loans, there will be a 100% risk weight.
Banks Bracing for Impact, Set to Allocate More Funds
Banks will need to set aside more money for personal loans that are deemed unsecured due to a greater risk weight. Stated differently, its weight restricts the amount of loans that banks can provide.
Rate Hike Consideration
Governor of the Reserve Bank Shaktikanta Das has discussed a possible hike in interest rates for certain consumer loans. In order to protect themselves, he counselled banks and NBFCs to bolster their internal monitoring systems, manage growing risks, and implement the necessary security measures. During his meetings with senior executives of major banks and large NBFCs in July and August, Das had also brought up the subject of the rapid growth in consumer loans and the growing reliance of NBFCs on bank credit.
Inflation Alleviation
Monetary policy actions and supply-side interventions have reduced retail inflation. However, there is still a long way to go and we are still in difficulty. This was stated in the Reserve Bank of India’s (RBI) November bulletin, which was made public on Thursday. The world economy is beginning to weaken in the current quarter, according to a bulletin item on the situation of the economy. The manufacturing industry has seen a downturn. Simultaneously, it appears that the post-pandemic surge in the services sector activities has peaked.
Global Risk Alert
It also stated that a major risk to the outlook for the world is tighter financial conditions. These statements were made in the article written by the group under the direction of RBI Deputy Governor Michael Debabrata Patra. The views presented in the essay, however, are those of the writers and do not necessarily reflect the views of the central bank, as the RBI has made very clear. The report goes on to say that the nation’s foreign exchange reserves are strong and its current account deficit is moderate. The rate of expansion has quickened. As a result, India’s GDP surpassed its pre-pandemic level, making it the world’s fifth largest economy.
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