Page 2 - Risk Weights News Today

Capital allocation may not necessarily become more prudent due to risk weight changes. Commercial compulsions may force lenders to reduce potential lending in less risky segments even as they meet increased capital requirements due to hike in risk weights of a specific loan segment

The directive is a clear negative as the lending business is key to profitability

RBI increases risk weights on unsecured consumer loans to address systemic risk, consumers should be cautious and exercise financial prudence.

“The Reserve Bank of India just wants balanced growth between all segments. So what it is saying is that on the unsecured personal loan, perhaps the 24% growth rate should be lower and closer to the overall growth rates of 15% but still 15-20% growth rate is very strong growth.”

The comments by the finance minister come a day after Reserve Bank of India Governor Shaktikanta Das advised banks and non-bank finance companies to be careful and ensure that credit growth exuberance is avoided

The ban on two lending products could affect customer acquisition. The risk weight increases would gobble up much of the recently raised capital for growth purposes.

By nature, NBFCs tend to have looser credit covenants than banks and are more flexible in terms of taking on riskier assets. Tell-tale signs of trouble are already emerging through the increase in delinquencies for smaller NBFCs and even for larger lenders in the September quarter

Tighter Reserve Bank of India norms mean that the bank risk weights on loans for AAA NBFCs have now more than doubled to 45% from 20% earlier, while those for AA-rated NBFCs have increased to 55% from 30% and for A- rated NBFCs to 75% from 50% earlier. Higher risk weights require banks to set aside more capital to provide cover against such loans.

India Business News: The Reserve Bank of India has increased the risk weight on consumer credit, making it costlier for banks and non-banks to lend to this segment. The mo

Regulatory intervention and share buyback contribute to sink bank’s core ratio to lowest point since 2016