Reserve Bank of India's (RBI) recent tightening of norms for personal loans
and consumer loans is likely to increase interest rates for these types of
loans.
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RBI action, interest rate increasing. |
Is there any chance of increasing interest rate?
This is because the RBI has increased the
risk weights
for these loans, which means that banks will have to set aside more capital
to cover them. This will make it more expensive for banks to offer these
loans, and they will likely pass this cost on to borrowers in the form of
higher interest rates.
The RBI's decision to tighten norms was driven by concerns about the rapid
growth of unsecured consumer loans, which have been growing at a much
faster pace than other types of loans. The RBI is worried that this rapid
growth could lead to an increase in defaults, which could destabilize the
financial system.
Due to RBI action.. Banks will need additional capital of Rs 84,000 crore. (SBI, Economists)
As a result, the bank's shares fell.
Shares of banks and non-banking financial institutions fell yesterday on
the RBI's announcement. Shareholders desperately tried to sell the bank's
shares.
Due to this, shares of leading banks like SBI 3.72 percent; Axis Bank shares also 3.28 percent; Canara Bank shares also 1.97 percent; Shares of ICICI Bank also fell by 1.62 percent. Shares of private sector bank RBL fell as much as 7.68 percent. BSE's banking sector index fell 1.48 percent.As far as non-banking financial institutions are concerned, SBI, Cards and Payments Corporation has a 4.96 percent share; Ujjeevan Financial Services shares 4.83 percent; Arman Financial Services also fell 3.78 percent.
The increase in interest rates is likely to have a negative impact on
consumers who are looking to take out personal loans or credit cards. It
will make these loans more expensive, which could make it difficult for
some people to afford them.
However, the RBI's decision is also likely to have some positive effects.
It could help to slow the growth of unsecured consumer loans and reduce
the risk of defaults. This could help to protect the financial system and
promote long-term
economic stability.
Overall, the impact of the RBI's decision is likely to be mixed. It will
make personal loans and credit cards more expensive, but it could also
help to protect the financial system and promote long-term economic
stability. It is important to weigh the potential costs and benefits of
the RBI's decision carefully before making a decision about whether or not
to take out a personal loan or credit card.
Here are some additional factors that could affect interest rates on
personal loans and consumer loans
- The overall level of inflation
- The demand for loans
- The supply of funds available to banks
- The riskiness of the loans
Personal loans increased from Rs 37.02 lakh crore in September last year
to Rs 48.26 lakh crore in September this year.
Leading banks including HDFC, ICICI and Kotak Mahindra have increased
their loans under the unsecured segment by 30 per cent in the September
quarter.
It is important to note that interest rates can fluctuate, and there is no
guarantee that they will always move in the same direction. However, the
RBI's decision to tighten norms is likely to put upward pressure on
interest rates for personal loans and consumer loans in the near term.