“Certain components of personal loans are recording very high growth… These are being closely monitored by RBI for any signs of incipient stress,” RBI governor Shaktikanta Das said on Friday. He asked banks and NBFCs to address build-up of risks, if any, and institute safeguards. “The need of the hour is robust risk management and stronger underwriting standards,” he added.
On an annual basis, personal loans contributed 37.7% of incremental bank credit in August 2023, according to RBI’s monetary policy report for October 2023. Within these loans, during August 2023, credit card loans had shown a growth of 30%, vehicle loans 21% and housing loans 14%.
The composition of bank credit has witnessed substantial change over time, with an increasing proportion of credit now going to services and retail loans relative to industry. Amid these structural changes, the impact of bank credit on GDP growth appears to have strengthened, the report noted.
The regulator also said that soon the guidelines for ombudsman schemes for individual lenders would be consolidated and harmonised into a single master direction. At present, the internal ombudsman framework in regulated entities comprises separate guidelines for select scheduled commercial banks, non-bank issuers of prepaid payment instruments, NBFCs and all credit information companies. These guidelines have similar design features but vary in certain operational aspects. All these would now be consolidated into one, RBI said.
The central bank also said that for urban co-operative banks (UCBs), it would double the existing limit for gold loans under its bullet repayment scheme to Rs 4 lakh. But this would be applicable only for those UCBs that have met “the overall target and sub-targets under the priority sector lending”.
RBI has also decided to extend the payments infrastructure development fund (PIDF) scheme by two years till December 31, 2025. “Since its launch in January 2021, the PIDF scheme has enabled over 2.7 crore new payment touch points across the country. The coverage of PIDF scheme is also being expanded to include the beneficiaries of PM Vishwakarma Scheme and to deploy emerging modes of payment acceptance, such as soundbox and Aadhaar-enabled biometric payment acceptance devices,” RBI said.