RBI Raises Risk Weight By 25% On Banks & NBFCs' Consumer Credit Exposure

On 16 November, the Reserve Bank of India (RBI) announced a 25 per cent increase in the risk weight on consumer credit exposure for both commercial banks and non-banking finance companies (NBFCs). The risk weight for consumer credit, previously set at 100 per cent, has been revised to 125 per cent. 

RBI Governor Shaktikanta Das had highlighted the rapid growth in specific consumer credit components during the October monetary policy, urging banks and NBFCs to strengthen internal surveillance mechanisms and address potential risks. 

The heightened risk weights apply to various consumer credit categories, excluding housing loans, education loans, vehicle loans, and loans secured by gold and gold jewellery. Additionally, the risk weight for credit card receivables of scheduled commercial banks and NBFCs has been increased by 25 per cent. 

Previously, scheduled commercial banks had a risk weight of 125 per cent, now adjusted to 150 per cent, while NBFCs had a 100 per cent risk weight, now revised to 125 per cent. Moreover, the risk weight on scheduled commercial banks' exposures to NBFCs has been raised by 25 per cent.