RBI flags rising risks in consumer lending

Delinquency declines; central bank says it's ready to act early

- Shayan Ghosh

The Reserve Bank of India (RBI) is vigilant and ready to act early and decisively to curb any risk building up, governor Shaktikanta Das said on Thursday, adding that some of RBI’s recent measures display the central bank’s resolve to maintain financial stability while not choking the flow of funds.

"Our recent macroprudential measures to curb lenders’ exuberance towards certain segments of retail loans underline our commitment to preserve financial stability without compromising the availability of funds for productive requirements of the economy," Das wrote in the foreword to RBI’s half-yearly Financial Stability Report.

Das was referring to the central bank’s November decision to raise risk weights on consumption loans, or those not backed by collateral. RBI has been pointing out how its decision to raise the risk weights was a pre-emptive measure.

The report said although delinquency levels across various groups of lenders declined, there are some signs of risk build-up in consumer credit. It presented four points to illustrate its concerns.