“RBI New Rules: It has been decided to increase the risk weight in respect of consumer loan exposure (outstanding and fresh) of commercial commercial banks, which includes personal loans but excludes home loans, education loans, vehicle loans and The interest rate on secured loans against gold and gold jewelery has been increased by 25 percentage points to 125%.
The Reserve Bank of India (RBI) has recently tightened the rules for consumer credit. In view of this, SBI Cards gave big information on Friday. The company said that there has been a decline of 4 percent in their capital adequacy ratio.
With RBI tightening its rules and assigning more risk to unsecured personal loans, banks and non-banking financial companies (NBFCs) have been asked to exercise more caution in granting such loans.
What is capital adequacy ratio?
Capital adequacy ratio is defined as the standards for banks to meet their liabilities and respond to credit and operational risks. This is seen as an economic strength of the company, a buffer against unexpected losses and protection of depositors’ money.
In the statement issued by the company, it was informed that “At present, we are well capitalized and are well above the fixed guideline of 15%. If needed, we will increase Tier 2 capital. We do not need to increase equity. We are a profitable company and our profits are sufficient for growth.”
What rules did RBI change?
RBI has clarified in a circular that in the revised rules, the risk weight on unsecured consumer loans has been increased by 25 per cent, however, this effect is not applicable on home loans, education loans, vehicle loans and secured loans against gold and gold jewellery. Would. Higher risk weights require banks to set aside more money as a safety net for consumer loans, potentially increasing the cost of such loans and limiting lending capacity.
“It has been decided to increase the risk weight in respect of consumer loan exposure (outstanding and fresh) of commercial commercial banks, which includes personal loans but excludes home loans, education loans, vehicle loans and The interest rate on secured loans against gold and gold jewelery has been increased by 25 percentage points to 125%.
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