The market is buzzing because the RBI (Reserve Bank of India) has become stricter about loans without security.
Recently, RBI made two new rules for personal loans. First, it said no to two products from Bajaj Finance.
Then, the central bank made it a bit harder for banks and NBFCs (Non-Banking Financial Companies) to give personal loans.
The weight of risk for giving these loans went up from 100 percent to 125 percent.
These quick decisions have made the personal loan area very quiet. Now, people are asking questions about what will happen to personal loans and credit card payments in the future.
Getting things in installments might not be easy now. This strictness from RBI could make it harder to buy things and get discounts using cards.
It seems that because of this strictness, banks and NBFCs might not let you turn your purchases into installments easily.
NBFCs usually make it easy for people to get personal loans in installments. The action taken against Bajaj Finance, which is the biggest company in this area, might make other companies hesitant, and it could become difficult to get things in installments.
Bajaj Finance wasn’t following rules about KFS. When RBI took action against Bajaj Finance, it said that the company wasn’t giving customers the ‘Key Fact Statement’ (KFS) as it should.
Even after clear instructions from RBI, the company didn’t provide KFS to customers. Because of this, the Insta EMI and Ecom products of the NBFC company got banned.
RBI was worried about the big increase in personal loans in the last few years. It had warned banks and NBFCs before to control them.
A report says that by January 2022, personal loans of less than Rs 50,000 had become 25 percent of all retail loans.
Retail loans include things like education, travel, buying consumer goods, and loans for cars and two-wheelers.
What is EMI? EMI stands for Equated Monthly Installment, which means equal monthly installment.
It’s the money you pay every month to repay a loan or buy something. You can pay back the loan you took from the bank gradually, every month.
But when you pay back the loan, you also have to pay some extra money, called interest, in total.
