RBI Enhances the Risk Weights in Respect of Consumer Credit Exposure of Commercial Banks
- News|Blog|FEMA & Banking|
- 2 Min Read
- By Taxmann
- |
- Last Updated on 18 November, 2023
Latest from Taxmann
Circular No. RBI/2023-24/85 DOR.STR.REC.57/21.06.001/2023-24, Dated 16.11.2023
The Governor in its statement flagged the high growth in certain components of consumer credit and advising banks and non-banking financial companies (NBFCs) to strengthen their internal surveillance mechanisms, address the build-up of risks, if any, and institute suitable safeguards, in their own interest. The high growth seen in consumer credit and increasing dependency of NBFCs on bank borrowings.
In this context, it has been decided to effect the following measures as under:
(a) Increase the risk weights in respect of consumer credit exposure of commercial banks/NBFCs
As per extant instructions applicable to commercial banks, consumer credit attracts a risk weight of 100%. On a review, it has been decided to increase the risk weights in respect of consumer credit exposure of commercial banks (outstanding as well as new), including personal loans. However, the housing loans, education loans, vehicle loans and loans secured by gold and gold jewellery are to be excluded. The risk is increased by 25 percentage points to 125%.
Similarly, Consumer credit exposure of NBFCs has also been raised to 125% in place of 100%.
(b) Increase the risk weights in respect of Credit card receivables
As per extant instructions, credit card receivables of scheduled commercial banks (SCBs) attract a risk weight of 125%3 while that of NBFCs attract a risk weight of 100%.
On a review, it has been decided to increase the risk weights on such exposures by 25 % points to 150% and 125% for SCBs and NBFCs respectively.
Further, it has also been decided to increase the risk weights on exposures of scheduled commercial banks SCBs to NBFCs by 25% points, over and above the risk weight associated with the given external rating.
Click Here To Read The Full Circular
Disclaimer: The content/information published on the website is only for general information of the user and shall not be construed as legal advice. While the Taxmann has exercised reasonable efforts to ensure the veracity of information/content published, Taxmann shall be under no liability in any manner whatsoever for incorrect information, if any.
Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.
The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:
- The statutory material is obtained only from the authorized and reliable sources
- All the latest developments in the judicial and legislative fields are covered
- Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
- Every content published by Taxmann is complete, accurate and lucid
- All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
- The golden rules of grammar, style and consistency are thoroughly followed
- Font and size that’s easy to read and remain consistent across all imprint and digital publications are applied
Sign Up
To subscribe to our weekly newsletter please log in/register on Taxmann.com
Latest Books
Everything on Tax and Corporate Laws of India
To subscribe to our weekly newsletter please log in/register on Taxmann.com
