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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.
Unsecured loans, though small in size, can pose a risk to the financial system if their expansion goes unchecked. The RBI observed an unusual growth of approximately 23 percent in unsecured loans, surpassing the country's average credit growth of 12-14 percent. This surge has even exceeded the overall bank credit growth of around 15 percent witnessed in the past year.
SBFC Finance IPO opens today: It has seen consistent improvement in asset quality, with the gross non-performing assets in FY23 falling 31 basis points year-on-year to 2.43 percent
By disclosing relevant business data and maintaining a clean credit history, small enterprises can obtain cash flow-based loans that could ease financial problems.