RBI Changes Rules of Cards and Personal Loans, Impact on Customer

Because the Reserve Bank is making rules stricter for loans without security and increasing the risk, banks will need Rs 84,000 crore more capital, according to economists from the largest bank in the country, SBI.

The Reserve Bank has tightened rules for loans like personal loans and credit cards, which are considered unsecured for banks and non-banking financial companies (NBFCs). This means the risk on these loans has gone up by 25 percent.

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In their report, SBI economists mentioned that since the repo rate is high, the RBI is using cash management and careful economic measures to meet growth and inflation targets.

They also said that because of the increased risk, banks will need more money, estimating around Rs 84,000 crore.

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The SBI economists believe that the RBI’s decision to increase risk sends a strong message that it is fully ready to handle risks related to initial financial stability.

The report also mentioned that the RBI’s actions are in line with efforts to identify problems with assets and losses in banks and NBFCs.

As for customers, S&P Global Ratings stated that the RBI’s decision will make loan interest rates go up, decrease credit growth,

and increase the need for capital in weaker financial institutions. However, it might improve the quality of assets.

S&P Global Ratings also mentioned that these changes won’t immediately affect the creditworthiness of India’s financial sector or the capital ratio for rated banks and financial companies.

It’s important to note that unsecured personal loans and credit card loans have increased by 26 percent in the 12 months ending September 2023.

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