Tighter Reserve Bank of India norms mean that the bank risk weights on loans for AAA NBFCs have now more than doubled to 45% from 20% earlier, while those for AA-rated NBFCs have increased to 55% from 30% and for A- rated NBFCs to 75% from 50% earlier. Higher risk weights require banks to set aside more capital to provide cover against such loans.
Unsecured loans, though small in size, can pose a risk to the financial system if their expansion goes unchecked. The RBI observed an unusual growth of approximately 23 percent in unsecured loans, surpassing the country s average credit growth of 12-14 percent. This surge has even exceeded the overall bank credit growth of around 15 percent witnessed in the past year.
SBFC Finance IPO opens today: It has seen consistent improvement in asset quality, with the gross non-performing assets in FY23 falling 31 basis points year-on-year to 2.43 percent
By disclosing relevant business data and maintaining a clean credit history, small enterprises can obtain cash flow-based loans that could ease financial problems.