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Source: ET
Context:
The Reserve Bank of India (RBI) has proposed lowering risk weights for various loan categories, linking them to borrower risk profiles.
Goal: Encourage disciplined credit behaviour, improve capital efficiency, and free up more capital for lending.
Key Proposals
| Loan Category | Key Changes / Criteria | Revised Risk Weight | Previous Risk Weight | Expected Impact / Rationale |
|---|---|---|---|---|
| 1. Credit Cards | • Transactors: Customers repaying dues in full for past 12 months classified under retail portfolio. • Other users: No change. | • Transactors: 75% • Others: 125% | 125% (uniform) | Encourages banks to acquire high-quality, low-risk customers. |
| 2. Home Loans | • Risk weight now linked to Loan-to-Value (LTV) and number of loans. • Up to 2 loans: 20% (LTV ≤50%) → 40% (LTV >80%). • Third loan: up to 60%, with 5% surcharge for loans above ₹3 crore. | 20%–60% (plus surcharge, where applicable) | 35%–50% (uniform earlier) | Introduces risk-based differentiation; supports competitive pricing while maintaining prudence. |
| 3. Personal Loans | Excludes housing, education, and vehicle loans. | 125% | 125% | Retained due to high-risk nature of unsecured credit. |
| 4. Corporate Loans | • BBB-rated: reduced to 75% • AA-rated: reduced to 20% • Unrated (>₹200 crore exposure): remains 150% | 20%–150% (based on rating) | 30%–150% | Improves capital efficiency for well-rated corporates, incentivising better-rated lending. |
| 5. MSME Lending & Real Estate | Risk weights linked to borrower risk profiles. | Not specified (dynamic) | Varied | Aims to improve capital allocation efficiency and align risk with borrower quality. |
