RBI tighter unsecured loan norms not aimed at stopping credit flow: Deputy RBI Governor

The Reserve Bank of India's (RBI) tighter norms for credit cards and personal loans are meant to reduce excessive lending in the segment and not to halt the flow of such credit, said the RBI Deputy Governor, M Rajeshwar Rao, on Friday.

In the previous month, the central bank asked lenders to set aside more capital to cover personal loans and lending via non-bank finance companies (NBFCs), on rising concerns surrounding soaring demand that could lead to greater risk.

"It is essentially a prudential measure to curb or moderate credit growth in certain specific sectors," M Rajeshwar Rao said at a post-policy media briefing held in Mumbai.

"It is not tantamount to turning off the tap. The tap is open but the only thing is that the pressure has been reduced," he said.

In a note on Thursday, Macquarie said, "The tighter norms are expected to moderate loan growth in the unsecured lending portfolio of banks."

Fintech player Paytm on Wednesday shared that it plans to issue fewer sub-50,000-rupee ($599.75) loans.

Reuters reported on Thursday that Indian banks and NBFCs have asked their fintech partners to curtail issuing small personal loans.

Loans of below 50,000 rupees make up less than 0.5 per cent of the total outstanding bank loans and do not pose a systemic risk, Swaminathan Janakiraman, a deputy governor at the RBI stated on Friday.

The RBI expects lenders to set aside more capital against loans given for consumption-led segments or unsecured credit that does not have a defined end-use, he added.