Business Economy 07 Aug 2019 RBI cuts risk weight ...

RBI cuts risk weight on consumer loans to 100 per cent

PTI
Published Aug 7, 2019, 7:28 pm IST
Updated Aug 7, 2019, 7:35 pm IST
On a review, it has been decided to reduce the risk weight for consumer credit, including personal loans, RBI statement said.
The 125 percent risk weight is much higher than what Basel requires us to maintain. It was fixed at a time when credit growth in this segment was excessively high, RBI deputy governor NS Vishwanathan said.
 The 125 percent risk weight is much higher than what Basel requires us to maintain. It was fixed at a time when credit growth in this segment was excessively high, RBI deputy governor NS Vishwanathan said.

Mumbai: In a move that will help lower loan pricing in the unsecured consumer credit space, the Reserve Bank of India on Wednesday reduced the risk weight for all consumer loans, barring credit cards, to 100 percent from the prevailing 125 percent.

Under the standardised approach for credit risk management, all unsecured consumer credit, including personal loans and credit card receivables, which are both unsecured lending, attract a higher risk weight of 125 percent or higher, if warranted by an external rating of the counterparty.

 

"On a review, it has been decided to reduce the risk weight for consumer credit, including personal loans, but excluding credit card receivables, to 100 percent," RBI said in the third bi-monthly monetary policy review, which governor Shaktikanta Das said is a move aimed harmonisation.

"The 125 percent risk weight is much higher than what Basel requires us to maintain. It was fixed at a time when credit growth in this segment was excessively high," deputy governor NS Vishwanathan said.

The central bank said guidelines in this regard would be issued by the end of August.

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