Avoid lending exuberance, tech reliance: RBI governor

Financial institutions must avoid lending exuberance, account for risks while pricing loans and not rely too much on analytics-based lending while partnering fintechs, Reserve Bank of India (RBI) governor Shaktikanta Das said.

- Shayan Ghosh

Banks, non-banking financial companies (NBFCs) and other financial entities must continue to do stress-testing of their books, Das said.

“At the current juncture, there may not be any immediate cause for worry. But to remain on top of things, banks and NBFCs would be well advised to take certain precautionary measures," he said at an event organized by industry lobby Ficci and the Indian Banks’ Association (IBA).

The governor’s speech comes days after the RBI decided to increase risk weights on consumer loans and loans to NBFCs in an attempt to slow down the pace of unsecured credit growth. The regulator has been cautioning lenders against risks emanating from such unfettered growth, and on Wednesday Das said these measures were targeted and pre-emptive.

The growth in some unsecured loans—those not backed by collateral—has surpassed total credit growth by a wide margin. Credit card outstanding increased 30% year-on-year ) in September, other personal loans grew 25%, and consumer durable loans rose 11%. Overall bank credit growth was 20% in the same period, showed RBI data.