RBI's Proactive Measures: Curbing Unsecured Lending Risks

RBI Governor Shaktikanta Das emphasized the central bank's proactive stance in addressing unsecured lending risks. The recent measures, which included increasing risk weights, have effectively slowed the growth of such lending portfolios. By acting early, the RBI aims to ensure the stability and resilience of India's financial system.

RBI Governor Shaktikanta Das emphasized on Thursday the Reserve Bank's proactive measures to anticipate and mitigate financial crises, particularly concerning unsecured lending. Das cited the November 2023 actions to curb the growth of riskier lending portfolios as effective, slowing down growth rates significantly.

Speaking at an international conference on financial resilience, Das highlighted the potential issues in the credit market due to increasing unsecured lending. He noted that while the overall financial metrics seemed stable, there were signs of weakened underwriting standards and a rush to expand unsecured lending portfolios.

The restrictions, which included raising risk weights on unsecured lending and NBFC exposure, aimed to preempt larger systemic problems. Das expressed satisfaction with the results, pointing out the slowdown in credit card and NBFC lending growth. He stressed the importance of prioritizing stability over profit in the banking sector's growth strategies.

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