Business News: RBI Increases Risk Weight To Limit Banks From Giving Personal Loans

18 Nov, 2023 Author: Ayushee Joshi

RBI On Personal Loans: The RBI expressed concerns about the rising number of personal loans and advised banks to strive to lower it when outlining the policy at the MPC meeting last month. However, it appears that banks and other financial institutions paid little attention to this issue, which is why the RBI made a significant move on Thursday to rein in the rapidly rising amount of personal loans. The Reserve Bank of India strengthened its regulations pertaining to personal loans that it deemed risky for non-banking financial firms (NBFCs) and banks.

RBI Limits Personal Loans Reliability

In a recent decision, the risk weight was raised to 25 percent. According to the RBI, the risk weight in proportion to the risk in the loan case has been increased. As a result, the risk weight for banks and NBFCs has been raised by 25% to 15% and 12%, respectively, by the RBI. Nevertheless, certain consumer loans, such as those for homes, education, and cars, will be excluded from the new regulations. Aside from that, debts secured by gold and gold jewellery will not be subject to this law. These loans will have a risk weight of 100 percent.