The Reserve Bank of India (RBI) has partly relaxed its stringent regulations on bank loans to small borrowers and non-bank lenders, as announced in two separate circulars issued on Tuesday.
This relaxation comes after the RBI decided to postpone its earlier proposals to increase the capital that banks must hold for new project loans and the liquidity they maintain for digital deposits. The adjustments follow a change in leadership at the central bank, with Sanjay Malhotra assuming the role of governor amid economic growth concerns.
The RBI has reduced the risk weight requirements for banks on consumer microfinance loans by 25 percentage points, bringing them down to 100%.
In 2023, the RBI had increased the risk weights for banks and non-bank financial companies (NBFCs) by 25 percentage points to 125% on retail loans, due to worries over a surge in small personal loans. Categories like housing loans were excluded from the higher capital requirement at the time, but microcredit was not.
The central bank has not provided specific reasons for reverting to the previous risk weight requirements.
