Increased Risk Weight: The RBI has raised the risk weight on consumer credit, including personal loans, from 100% to 125%. This means that lenders now need to maintain higher capital reserves for these riskier loans.
Costlier Unsecured Lending: With the higher risk weightage, lenders such as banks and Non-Banking Financial Companies (NBFCs) will face increased costs for offering unsecured personal loans.
Impact on Interest Rates: To cover the higher capital requirements, lenders are likely to raise interest rates on personal loans. Experts estimate that interest rates could increase by up to 1.5%, leading to higher equated monthly installments (EMIs) for borrowers.
Stricter Eligibility Criteria: The new rules may also lead to stricter eligibility criteria for personal loans. Lenders might become more cautious and implement a more rigorous assessment process for loan approvals.
Overall, these changes signify a shift towards more cautious lending practices, aimed at reducing the risks associated with personal loans. Borrowers should be prepared for potentially higher costs and more stringent approval processes when seeking personal financing in 2024.🚀 Ready to level up your finances? Say goodbye to tax woes with Savingz! 🎉
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