The representative body for non-bank lenders has welcome the move by the RBI to regulate the growth of consumption oriented credit
FinTech BizNews Service
Mumbai, November 24, 2023: RBI has decided to effect certain measures to curtail the high growth in certain components of consumer credit in order to address the build up of risks, if any, and institute suitable safeguards, in the interest of the banks and NBFCs. “We welcome the move by the RBI to regulate the growth of consumption oriented credit and welcome the move to differentiate that from credit intended for industrial and commercial growth and for the purpose of productive asset creation. This we believe would redirect credit flow towards capital expenditure and aid in greater degree of funds flow towards meeting working capital needs especially of the MSME and self-employed sectors, states Mahesh Thakkar, Director General, Finance Industry Development Council.”
FIDC, however, has requested the RBI to kindly restore the risk weight on bank loans to NBFCs, where majority of the NBFCs’ loan book consists of MSME loans, vehicle loans and other categories of loans that have been excluded from the purview of the aforesaid circular. Thakkar has added in the letter written to the RBI: “We request the RBI to re-evaluate the sharp increase in risk weights assigned to bank loans to NBFCs. While we understand the purpose of the Bank to regulate credit flow to the consumer sector, this measure inadvertently, also has the potential to sharply reduce flow of credit to MSMEs, self-employed and other sectors which rely upon credit from NBFCs. The cost of funds to these critical sectors is also likely to increase sharply, especially at a time when the MSME and self-employed segments are emerging out of the Covid impact and are looking ahead to increase capital expenditure through modernization and expansion of productive capacity.”
