RBI new norms will hit banks’ CAR: S&P

New Delhi: The Reserve Bank’s decision to tighten norms for consumer credit by raising risk weight for unsecured personal loans is likely to hit banks’ capital adequacy ratio (CAR) by 60 basis points, S&P Global Ratings said on Friday. The move will curtail riskier bank lending to consumers and is expected to squeeze the nonbank sector in particular.

The RBI on Thursday increased risk weights on unsecured personal loans, credit cards, and lending to nonbank finance companies (NBFCs) by 25 percentage points. This will likely lead to higher lending rates, lower credit growth, and increase the need for capital raising among weak lenders, S&P Global Ratings said.