Waiting for a fair wind: Shadow bank risks persist despite RBI relief

Consumer credit exposures of commercial banks and NBFCs (excluding housing, education, vehicle loans and loans secured by gold and gold jewellery) still attract a weighting of 125 per cent

Towards the end of February, the Reserve Bank of India (RBI) restored the risk weighting on banks loans to non-banking financial companies (NBFCs; including to microfinance institutions, or MFIs) to 100 — back to its November 2023 position — from 125. It is only a partial relief though. 

“Higher risk weighting on unsecured lending continues to be in place while the same on bank funding to NBFCs has been done away with. This is a positive step by RBI,” says Rajiv Sabharwal, managing director (MD) and chief executive officer (CEO), 

Tata Capital. 

In effect, the banking regulator has only partly restored