Keki Mistry on what RBI diktat on unsecured lending means for banks and NBFCs
Keki Mistry, Non-Executive Director, HDFC Bank, says “people are still not seeing any concern or any deterioration in terms of asset quality as far as the unsecured loans are concerned. So, to my mind, this is a precautionary measure by the RBI, a welcome precautionary measure, given that this kind of lending has increased so much in the system.”
What are your initial thoughts on this latest circular from the RBI on unsecured lending and also can you help us understand in layman terms the impact it would have on the financial sector — banks, NBFCs, all of them?
My view is that RBI for nearly two months has been continuously making some remark or comment about the fact that the quantum of unsecured lending in the system has increased a lot and RBI is a little concerned about it. One was expecting some kind of regulatory action around that. What exactly that action would be, one did not know and now we know that the risk weight on these loans has been increased by 25 percentage points.
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Offering CollegeCourseWebsiteIIM LucknowIIML Chief Executive Officer ProgrammeVisitIIM LucknowIIML Chief Operations Officer ProgrammeVisitIndian School of BusinessISB Chief Technology OfficerVisitSo, where it was 100%, it has become 125%. Where it was 125%, it has become 150%. Fortunately, to the best of my knowledge, whatever little I have known and spoken to people in the system, people are still not seeing any concern or any deterioration in terms of asset quality as far as the unsecured loans are concerned. So, to my mind, this is a precautionary measure by the RBI, a welcome precautionary measure, given that this kind of lending has increased so much in the system.
All it means
