India’s central bank has moved to curb rising stress in the burgeoning market for unsecured consumer loans, hitting fintech lenders such as Paytm who had been increasingly relying on riskier borrowing for growth.
The Reserve Bank of India announced in November that lenders had to increase the risk weight, the minimum amount of capital they must hold in relation to the asset, for personal loans from 100 per cent to 125 per cent after data showed the share of delayed payments was rising.
The measure is designed to avert soaring consumer debt and delinquencies by pushing up the cost of capital and slowing growth for companies who have in recent years poured into higher-risk credit card or retail lending for fatter margins. RBI Governor Shaktikanta Das warned banks to avoid “all forms of exuberance” after imposing the curbs.