RBI decision to cut risk weights for retail loans credit negative: Moody's

Rating agency Moody's said on Wednesday that Reserve Bank of India's decision to reduce risks weights for consumer loans from 125 per cent to 100 per cent at a time when economy is slowing down was credit negative.

The reduction in risk weights would encourage banks to increase their exposure to this loan segment at a time when credit risks are already increasing from a slowing economy, Moody's said.

Moody's said that the reduction of risk weights would lower the capital requirements and thus the loss absorbing buffer on these loans.

Consumer credit like personal loans have been reporting strong