The rise and rise of personal loans

Higher risk weight will increase the cost of capital for such loans for lenders and discourage them to go overboard

Finally, it happened. Even though the heads of public sector banks (PSBs) have not been losing sleep over unsecured small loans turning bad since they form a minuscule part of their overall credit book, the Reserve Bank of India (RBI) doesn’t want to take a chance. Last week, it raised the risk weight for consumer loans, barring housing, education, vehicle and gold loans, and loans given to microfinance entities and self-help groups by banks and non-banking financial companies (NBFCs) by 25 percentage points. This will increase the cost of capital for such loans for lenders and discourage them from going