Key Points
The Reserve Bank of India's recent decision that require banks and non-bank financial institutions to allocate more capital against unsecured consumer credit will constrain loan growth in the segment, according to a report..
"We generally view the tightening as a credit-positive effort by authorities to control emergent systemic risks posed by consumer credit, which has increased rapidly in recent years off a relatively low base," it said.. Growth in banks' unsecured credit card loans and personal loans in the first half of the current financial year stood at 29.9 per cent and 25.5 per cent year-on-year, respectively..
This is against total system loan growth of 20 per cent, the report said.. Increasing exposure to unsecured consumer credit -- typically a riskier loan category -- indicates greater risk appetite, as banks and Non Bank Financial Institutions (NBFIs) seek to protect net interest margins amid stiff competition for secured retail loans, it said...
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