RBI CIRCULAR IMPACT CONSUMER MINDSET TOWARDS LOAN
Personal loans dearer post RBI risk nudge
Banks adapt to RBI's risk weight changes by adjusting rates and enhancing capital adequacy. The pricing of new loans reflects increased risk, ensuring stability in unsecured lending. Tightened underwriting standards support sustained growth and portfolio quality, aligning with regulatory directives to manage loan risks effectively.
Growth, consumption to investment-led
The investment upcycle is now being powered by both public and private sectors. There is also a revival in manufacturing exports that adds to the tailwind. The economy is now adjusting from consumption- to investment-led growth. And all of it is not cyclical. Some of the demand shift may be permanent. This opens up prospects of India achieving materially more of its growth potential.
Stock brokers push lending; InsuranceDekho’s latest acquisition
Happy Tuesday! Tech-first broking companies are looking to diversify into the credit business to build a larger financial services play. This and more in today’s ETtech Morning Dispatch.
Risk weighting slows unsecured loan growth
The growth of unsecured credit in India, including personal loans and credit card outstanding, slowed to 18% in April from 23% in November 2023. The Reserve Bank of India's risk weighting on such exposures aims to reduce delinquencies in the banking system.
Banks' credit growth in FY25 to slow down to 14% on lower GDP uptick, RBI measures: Crisil
Crisil forecasts a 2 percentage point drop in the banking system's credit growth to 14% for the fiscal year 2024-25, citing factors such as lower GDP growth, RBI measures like higher risk weights on unsecured loans, and a high base effect. Slower deposit growth is expected to temper credit expansion, though the fundamental drivers of credit demand remain intact. While corporate segment growth is projected to maintain at 13%, retail growth will slow to 16%.
Paytm witnesses slowdown in core businesses of merchant payments, consumer lending
In the first four months of 2024, Paytm’s user base shrank by 24% to 80 million, while the count of its active devices dropped by about 1 million over February and March on account of attrition, according to its quarterly filings with the stock exchanges. User attrition happened as a result of regulatory action by the RBI, it said.
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View: Fund pool, more AIFs than buts
In 2015, when investment in AIFs was made permissible under the automatic route, rules on indirect foreign investment were also recalibrated. Downstream investments by companies were categorised based on the origin of invested capital. However, for AIFs, emphasis was placed on control over deployment of the capital, rather than the capital origin, indicating a nuanced regulatory approach to foreign investments under the extant framework.
Tighter regulations on personal loans and project finance may hurt banks in FY25
Indian banks had a strong fiscal 2024 but face challenges in the current year due to regulatory changes impacting credit growth and net interest margins. Return ratios and riskier lending are also areas of concern as the market adapts.
RBI's latest norms may derail Modi govt's flagship economy driver
RBI's draft guidelines propose increased provisioning for infrastructure projects under construction, potentially impacting India's capital expenditure momentum. Banks fear higher provisions could elevate interest rates, delay projects, and stress loans. This move could impede the Modi government's capex drive, which has invigorated private sector activity. Despite historical loan default trends, RBI's rationale for these stringent measures remains unclear
Aditya Birla Finance, others may have invoked Paytm’s loan guarantees
Aditya Birla Finance invoked loan guarantees from Paytm due to defaults. Partnership stress with other lenders. Paytm's lending business faces challenges post central bank's ban. Changes in top management. Reduced consumer loan portfolio to less than 1%.
How zero-waste logistics can close the loop on sustainability
In recent years, sustainability has surged to the forefront of business priorities, marking a 292% increase since 2021, according to Gartner's CEO survey.
6 steps for borrowers to reduce home loan EMIs as RBI to keep higher interest rate for longer
Home loan borrowers have witnessed one of the worst nightmares when the interest rate home loan shot up significantly in 2022 and 2023 after multiple repo rate hikes by RBI. Since then they have been paying higher EMIs and eagerly waiting for the interest rate to come down. Their wait seems to be getting longer as RBI holds the repo rate however, there are many other steps they can take to reduce their home loan EMIs.
There could be trade-off between innovation and regulation: RBI DG Rajeshwar Rao
Rajeshwar Rao also pointed out that regulators must focus on achieving a delicate equilibrium that addresses the critical concerns without imposing an undue burden on regulated entities.
MSME fintechs steal show as consumer lending loses fizz
All these years, digital lending has been mostly synonymous with unsecured consumer credit. But that is slowly changing. Business-focused fintech lenders are increasingly grabbing the limelight with more traditional lenders opening up to work with them.
RBI move to bring transparency in MSME loans will curb hidden charges, predatory lending practices, says industry
Industry stakeholders are of the view that this is a win-win situation for both lenders and borrowers. They expect it to bolster financial literacy, helping familiarise borrowers with key loan and financial terms, and raise financial awareness.
Sunil Subramaniam is betting on consumption and banking this year. Here' why
Sunil Subramaniam believes that the banking sector may see a downgrade in terms of portfolio allocation due to the provisions announced by the RBI. However, he expects decent and healthy banking numbers, especially in corporate lending and SMEs. He also anticipates a pickup in mid and mass market segment consumption, supported by increased rural wages and government spending in an election year. He also likes PSU banks, which he believes will finance the capex cycle and be the vehicle of government dispersal.
Pioneering change: Evolving products and technology in the time of regulatory shifts within financial services
As regulatory changes take root, the financial services industry in India stands at the crossroads of challenge and opportunity. The imperative to innovate, diversify, and balance short-term pressures against long-term gains is reshaping the narrative.
RBI circular impact: Banks may have to set aside more cash, AIF inflows to be hit
A Reserve Bank of India (RBI) circular issued Tuesday prohibits banks and NBFCs from investing in AIFs to prevent questionable asset transfers. This will affect large banks and NBFCs involved in AIF investments. "This RBI measure imposes significant requirements on banks and NBFCs," said Sai Krishna Bharathan, Partner, Trilegal.
Kapish Jain on what RBI circular on transactions pertaining to AIFs mean
“If any of your debtors who are under stress and if you are moving into an AIF, now either you would need to offload them within 30 days, liquidate it entirely or you make a 100% provision and the mandate is that those debtors who were in your book in the previous 12 months before you move in into an AIF structure.”
RBI’s repo rate pause likely to help sustain housing sales momentum
The Reserve Bank of India's decision to maintain the repo rate at 6.5% for the fifth consecutive time is expected to support the housing property market, particularly in mid-income and premium housing sales. The move is seen as promoting a consistent trajectory of growth in home sales, with stable interest rates benefiting both residential and commercial real estate.
Paytm scales down small-ticket loan business amid regulatory hurdles
This move assumes significance at a time when the Reserve Bank of India has instructed banks and NBFCs to slow down on their unsecured lending business and increase risk weightage on such loans.
Small finance banks wants RBI to clear doubt about micro loan risk weightage
Microfinance loans constitute a majority share of SFBs' loan portfolio, barring a few exceptions like AU and Equitas. The confusion arose because the regulator categorically exempted microfinance and self-help group loans from the requirement of higher capital allocation for non-banking finance companies (NBFCs) while it remained silent about the status of microfinance loans for banks including SFBs.
RBI's new lending norms: NBFCs play up spectre of collateral damage, knock on regulator's doors
In a written communication to the apex bank, NBFCs -- lend to small businesses and provide secured loans -- have sought lower risk weightage on bank loans sanctioned to them. They have also requested an appointment with the RBI.
Will RBI circular impact consumer mindset towards loan on one click? Adhil Shetty explains
“The Reserve Bank of India just wants balanced growth between all segments. So what it is saying is that on the unsecured personal loan, perhaps the 24% growth rate should be lower and closer to the overall growth rates of 15% but still 15-20% growth rate is very strong growth.”
Not much impact on margins after RBI hikes risk weight on unsecured lending: RBL Bank
"Our capital (CET 1 ratio) cost will go by 60 bps because of the RBI action, but the impact on our margin will be negligible at 1-2 bps only," the bank's chief executive and managing director R Subramaniakumar told reporters on the sidelines of the IBA-Ficci-organised national banking summit here on Wednesday.
Loan growth should still be faster than nominal GDP growth over a 5-10-year period:Vishal Goyal
“A steady ROA expansion has happened in the last four-five years due to the factors which you just mentioned. We feel that we are probably closer to that expansion, like the peak of expansion and now we should start seeing some contraction due to NIMs stagnating or declining and credit cost already bottoming. Now, we would only see some increases in credit cost towards the average.”
Banks to need Rs 84,000 cr excess capital due to RBI tweaks on unsecured loans: SBI Economists
In a recent report from the State Bank of India (SBI), economists have highlighted that the banking system in India is anticipated to require an additional Rs 84,000 crore of excess capital. This need arises from the revised risk weights on unsecured loans, as introduced by the Reserve Bank of India (RBI). The SBI economists, in their analysis released on Friday, also noted that the RBI is currently employing liquidity and macro prudential measures to attain the desired objectives of growth and inflation. Furthermore, they emphasized that the repo rates have reached their peak.
RBI directive on unsecured loans: No big impact on banks & well-diversified NBFCs
“Our initial assessment at this point in time is, if we were to look at something like a bank or a well diversified NBFC, the overall impact on capital may not be material. We are still reworking the numbers, but initial assessment does seem to suggest that the overall impact on the current capital would not be more than 75, 80 basis points as such.”
RBI wakes up to the systemic risk from exuberant retail lending
The complacency of lenders with respect to a potential surge in delinquencies, where households are funding ordinary consumption using retail loans and possibly being used for trading in the financial markets may be bothering the RBI as they pose a systemic risk for financial stability.
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