Haryana Update: It is noteworthy that in the last few years, the rate of unsecured personal loans and credit card loans has increased rapidly in the country. Such loans have increased by 24 percent in the last 12 months to September 2023. Know the latest updates on this…
In fact, the Reserve Bank of India tightened the rules related to loans like personal loans and credit cards, which are considered unsecured by banks and non-banking financial companies (NBFCs). The revised criteria increased the risk weight by 25 percent.
Likely to impact the non-bank sector
This step will reduce the chances of giving risky bank loans to consumers. Also, it is likely to put pressure on the non-bank sector in particular. S&P Global Ratings said this would lead to higher interest rates on loans, reduce credit growth and require weaker financial institutions to raise more funds. Despite the higher risk weighting, the asset quality will eventually improve.
likely to be affected
Geeta Chugh, credit analyst at S&P Global Ratings, said slower loan growth and a greater focus on risk management would likely improve asset quality in the Indian banking system. “However, the immediate impact is likely to be higher interest rates for borrowers, slower credit growth for financial institutions, reduction in capital adequacy and some impact on profits. We estimate that shares of (Tier-1) banks will rise,” he said. There will be a reduction in capital adequacy by about 0.6 percent.
financial institutions will be adversely affected
“Financial companies will be worst hit by this as their rising bank lending will lead to increased costs, as well as impact on capital adequacy,” Geeta Chugh said. The rating agency also said that these changes will have implications for India’s There will be no immediate impact on the economy. The risk-adjusted capital ratio of top rated banks and banks will also not be affected.