RBI LENDING NORMS
Credit funds, family offices fill void left by banks at AIFs
The central bank came out with a circular in December 2023, requiring mainstream banks and NBFCs to divest their investments in AIFs that have funded any company that has borrowed from the bank or NBFC. The regulator had also raised provisions for banks or NBFCs investing in AIFs that subsequently lend to their borrowing companies.
Banks ask RBI to ease liquidity rule to keep credit taps open
Indian banks are urging the industry regulator to relax the current liquidity coverage requirements. They believe easing these mandates will free up more funds for lending.
RBI to come out with norms for securitising stressed loans
RBI is set to release final guidelines for securitisation of stressed assets, potentially initiating a junk bond market in India.
RBI to boost rupee's internationalisation, liberalise norms for non-residents
The Reserve Bank of India (RBI) is intensifying efforts to internationalize the Indian Rupee (INR) by making regulatory changes for non-residents and enhancing the appeal of the GIFT City as an international financial center. The RBI plans to liberalize regulations related to INR accounts for non-residents and allow them to open rupee accounts outside India.
PSBs seek changes to rules for Infra loans, may approach govt
State-owned lenders plan to approach the government seeking changes to terms governing performance bank guarantees (PBGs), timely compensation from concessioning authorities, and greater immunity for board members sanctioning funds for infrastructure projects as they firm up their response to Reserve Bank of India (RBI) draft rules on project financing that call for higher provisioning.
Road Ministry against hike in project lending rates, bats for status quo
"RBI, as a regulator, will have to create that balance to ensure financial viability of road projects does not take a hit," an official said. The central bank earlier this month proposed tighter norms, requiring lenders to allocate 5% of the project loan amount as general provisions during the construction phase, up from 0.4% provisions now.
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How Jaipur-based AU Small Finance Bank plans to plug a $400 billion credit gap
India’s largest small finance bank has recently bulked up and is now looking to utilise its heft to increase its presence in MSME lending. How successful would it be, is the billion-dollar question.
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.
Indian renewables may get costlier as RBI mulls changes
A top consultancy firm predicts that the Indian central bank's proposals on project financing may raise borrowing costs for renewables projects by up to 1%, potentially leading to increased wind and solar power prices. Lenders may have to reserve 5% of capital for infrastructure projects under construction, compared to the current 0.4% norm. As projects mature and start generating cash, the allocation can decrease to as low as 1%. These changes could make it harder for construction projects to secure financing, impacting the pace of renewable energy deployment as India aims to accelerate green energy installations to meet future goals.
What's the new RBI proposal giving cold sweats to lenders?
The Reserve Bank of India (RBI) has proposed stringent new rules for project finance, aiming to minimize risks associated with long-gestation infrastructure projects. These regulations include higher provisioning during construction phases and classification of delayed projects as non-performing assets. However, banks and NBFCs fear these rules may hinder project viability and impede India's capital expenditure momentum.
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
RBI issues draft guidelines on infrastructure finance
RBI introduces rules to enhance infrastructure funding and risk management through project lending guidelines, covering aspects like consortium lending, moratorium limits, and NPV requirements for lenders. The RBI also proposed that the original or revised repayment tenor, including the moratorium period, if any, should not exceed 85% of the economic life of the project.
RBI proposes tighter project finance rules
Reserve Bank proposes stricter lending rules to prevent stress on bank books during project implementation. Provisioning increases to 5% during construction phase, with reductions based on project phase and conditions met. Public feedback accepted until June 15.
RBI proposes new norms for LSPs to promote transparency
LSP is an agent of a regulated entity (RE) who carries out one or more of lender's functions or part thereof in customer acquisition, underwriting support, pricing support, servicing, monitoring, recovery of specific loan or loan portfolio on behalf of REs in conformity with extant outsourcing guidelines.
ET Explainer: What RBI's norms on penal charges mean for borrowers
The Reserve Bank of India (RBI) has implemented new guidelines on penal charges for loan accounts starting from April 1. These regulations prohibit commercial banks and finance companies from imposing penal rates on loan defaults or any non-compliance event. The guidelines aim to promote credit discipline and prevent banks from using penal charges as a revenue enhancement tool.
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.
Aditya Birla to consolidate financial services to comply with RBI norms
Aditya Birla Finance, the lending subsidiary of the steel to telecom group, will merge with its listed parent Aditya Birla Capital to comply with the Reserve Bank of India's (RBI) scale-based regulations for non-banking finance companies (NBFCs). The merger will result in Aditya Birla Finance's mandatory listing by September 30, 2025.
Banks seek incentives for sustainability-linked loans from RBI and Centre
Banks are urging for incentives, such as relaxed norms on risk-weighted assets (RWA) and cash reserve ratio (CRR), for sustainability-linked loans. These loans tie interest rates to a company's sustainability performance, promoting adherence to environmental, social, and governance (ESG) norms. Discussions with stakeholders, including the RBI, are ongoing, with proposals to include green financing in priority sectors like electric vehicles (EVs) and renewable energy.
November measures on unsecured lending trims growth
The Reserve Bank of India's tightening measures on unsecured loans and credit card outstanding are impacting growth. Unsecured loans are growing at a slower pace of 22.9%, down from 24.3% prior to the central bank's actions. The outstanding unsecured loans amount to 13.33 lakh crore as of December. Credit card outstanding growth has also slowed to 32.6% from 34.2%. Overall retail loans growth has decreased to 17.7% in December. The Reserve Bank of India's actions have had an impact on the lending market.
ET Analysis: Bulk of credit card loans are subprime
Despite the RBI's imposition of higher risk weights on unsecured lending, credit card outstanding has grown by 34 per cent year-on-year as of end-November. The outstanding dues amount to Rs 2.4 lakh crore, accounting for 5 percent of retail loans. The RBI has been encouraging the use of technology and underwriting models to mitigate risk.
Bank lending to NBFCs slows but sharp fall unlikely
Analysts however do not expect a sharp slowdown in bank lending to NBFCs, despite the RBI increasing risk weights on such loans in November. The central bank increased the risk weight on consumer credit for banks and NBFCs to 125% from 100%.
Penal charges in loan accounts: RBI gives 3 more months to banks, NBFCs to implement modified norms
Regulated entities, which include banks and NBFCs, have been asked to ensure that the instructions are implemented in respect of all the fresh loans availed from April 1, 2024 onwards. In the case of existing loans, the RBI said the switchover to new penal charges regime should be ensured on the next review/ renewal date falling on or after April 1, 2024, but not later than June 30, 2024.
Tighter norms for investment by banks in AIFs
HFCs could see some pressure to either divest or fully provide for some assets as some of them have investments in AIFs, and those funds have invested in real estate companies. "It may also significantly impact the existing investments from the likes of banks, NBFCs and Sidbi in several AIFs," said Tejesh Chitlangi, Senior Partner, IC Universal Legal.
Reserve Bank of India tightens connected lending norms
India's central bank today said it has decided to tighten connected lending regulations to avoid cases influential or persons in power can sway decisions on lending in favour of borrowers with close connections. Shaktikanta Das said the RBI will come out with a unified regulatory framework on connected lending.
Chill sets in for consumer lending apps; what’s cooking at food delivery platforms?
Consumer lending firms are set for difficult days ahead as a central bank diktat on reining in unsecured loans has choked off much-needed credit lines.
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.
Fintech lenders may face the brunt of RBI’s tightening of capital norms for unsecured lending
Given that fintechs have mostly focussed on disrupting unsecured personal loans, consumer durable loans, credit cards and gold loans through the use of technology, the impact on them will be huge, said industry insiders.
RBI tightens norms for consumer loans amid rise in unsecured lending
The Reserve Bank of India has increased risk weights for consumer credit exposure in commercial banks, including personal loans, by 25 percentage points to 125%. This comes after warning about the risks of surging personal loans. Unsecured loans have been an outlier at 23%, compared to an average of 12%-14%. This has led to record borrowing and household savings dropping to multi-year lows.
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