RBI flags unsecured loan exposure caps, private credit links

India's banks and non-bank lenders are set to witness a slew of regulatory and supervisory changes in the year ahead, as the central bank pushes ahead with its recent measures to strengthen the banking system.

- Gopika Gopakumar

The Reserve Bank of India (RBI) will consider removing prepayment penalties on floating rate term loans to small businesses; examine inter-linkages between private credit firms, banks and non-banks; and regulate payment aggregators engaged in point-of-sales terminals, the central bank's annual report on trends and progress in banking said.

RBI is also working on issuing final guidelines on the disclosure framework for climate-related financial risks, which will include scenario analysis and stress testing for these risks.

"In India, the size of such private credit firms and the resources raised by them is not very large. A closer look is, however, warranted at the interlinkages between REs (regulated entities), including banks and NBFCs, with such firms. Strong interrelationship between them could give rise to systemic concerns, along with the possibility of regulatory arbitrage to circumvent regulations," the report for FY24 said.