RBI Implements Stringent Measures to Curb Credit Growth, Axis Bank’s Amitabh Chaudhry Emphasizes Caution.
In an insightful conversation at the World Economic Forum in Davos, Axis Bank’s Managing Director and CEO, Amitabh Chaudhry, addressed the Reserve Bank of India’s growing concerns about the exuberant expansion of credit, particularly in the retail sector.
Amitabh Chaudhry, Managing Director and Chief Executive Officer of Axis Bank, asserted on Monday, January 15, that India stands out as one of the prime choices for global expansion. Chaudhry emphasized that the RBI is sending a clear signal to the market to temper down the credit growth, especially in unsecured loans, and to remain vigilant about potential credit risks, particularly among smaller players, including fintechs. The Axis Bank chief shed light on the RBI’s recent regulatory measures, including heightened capital requirements for personal loans and credit cards, aimed at curbing excessive risk-taking in the financial sector.
RBI’s Cautionary Measures
Chaudhry articulated the Reserve bank worries regarding the exuberance observed in credit growth, particularly in retail loans, and the specific concern over unsecured loans. He underscored the need for the market to exercise restraint and be cautious about potential credit risks, especially among smaller financial entities, including fintech firms. This cautionary stance is in line with the RBI’s efforts to maintain the stability of the financial system and protect consumers from undue financial vulnerabilities.
Stricter Norms
The RBI, in its proactive approach, had previously announced stricter norms for personal loans and credit cards in November 2023. These regulations included a substantial 25-percentage-point increase in risk weights for banks and non-banking financial companies (NBFCs), necessitating higher capital requirements for each loan issued. Chaudhry highlighted the significance of these measures in instilling discipline within the financial sector and ensuring that lending practices align with prudent risk management principles.
Amitabh Chaudhry’s insights provide a valuable perspective on the Reserve bank endeavors to strike a balance between facilitating economic growth and safeguarding financial stability. As the banking sector navigates the evolving landscape, the emphasis on responsible lending practices and cybersecurity gains prominence, reinforcing the need for a collaborative effort to fortify the resilience of India’s financial ecosystem.
