RBI says loans & advances growth showing signs of slowdown

7 Jun 2024 , 12:26 PM

Governor Shaktikanta Das stated on Friday that since raising concerns about unsecured retail lending in November, the Reserve Bank of India has observed some reduction in some loans and advances. Additionally, it stated that banks need to keep a careful balance between their assets and obligations.

“We had raised some concerns in November of last year over the unsecured retail loan market’s rapid expansion and the NBFC industry’s over-reliance on bank funding. While announcing the results of the Monetary Policy Committee meeting, Das stated that recent data indicates a certain amount of slowdown in these loans and advances.

Bank credit growth to NBFCs decreased from 18.5% in November 2023 to 14.4% in April 2024, while credit growth in unsecured personal loans, such as “credit card outstanding,” fell from 34.2% in November 2023 to 23.0% in April 2024.

Currently, the central bank is keeping an eye on data to determine whether any more actions are required.

“The Boards and top management of REs should ensure that risk limits and exposures for each line of business are kept well within their respective risk appetite framework,” Das stated. He drew attention to the continued disparity in deposit and credit growth rates and urged the banks to reconsider their approach to business strategies.

In November 2023, the RBI increased the risk weights for bank loan to NBFCs and unsecured consumer credit in order to prevent any potential danger from building up in these sectors.

To maintain financial stability, the RBI has also started implementing other measures. The Reserve Bank of India (RBI) has put forth new project financing standards that mandate lenders keep aside 5% of outstanding exposures during the building phase, as opposed to the present 4%. After it’s up and running, the requirement will decrease to 2.5%.

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