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The Reserve Bank of India has increased risk weights for consumer credit exposure in commercial banks, including personal loans, by 25 percentage points to 125%. This comes after warning about the risks of surging personal loans. Unsecured loans have been an outlier at 23%, compared to an average of 12%-14%. This has led to record borrowing and household savings dropping to multi-year lows. ....
Credit costs for unsecured loans could make up between 60% to 70% of the total provisions for large private sector banks in fiscal 2025 after a strong 26% growth in this segment the last five years. Unsecured loans contribute about 6% of overall system (incl. NBFCs), and contribute 11% for the banking system up from 8% in fiscal 2019. ....