Govind Gurnani on LinkedIn: Whether Technical Write-Off In Banks Can Be Considered As A… | 10 comments (2024)

Public sector banks funding undisclosed cronies, then writing off the NPAsThe RBI’s RTI reply to The Indian Express says that loan write-offs by banks rose to Rs 209,144 crore during the fiscal ended March 2023 as against Rs 174,966 crore a year ago in March 2022 and Rs 202,781 crore in March 2021.Banks have written off a whopping Rs 15,31,453 crore (US $ 187 billion) since FY2012-13, as per RBI data.While many big and small defaulted loans were written off by banks over the years, the identity of these borrowers was never revealed by banks or the RBI.------------------------------------------------By contrast, what will happen if an ordinary man takes a small loan and defaults on a single EMI?Both the MMS & Modi Govts are complicit.#publicsectorbanks #india #npa #writeoffshttps://lnkd.in/diHDManV

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The Reserve Bank of India (RBI) has banned banks and non-banking financial companies (NBFCs) from charging penal interest on loan accounts, effective January 1, 2024. The RBI was concerned that lenders were using penal interest as a way to generate revenue, rather than as a way to recover outstanding loans.Under the new rules, lenders will only be able to charge "reasonable" penal charges in case of default in loan repayment. The RBI has not defined what constitutes "reasonable" penal charges, but it is likely that these charges will be lower than the current penal interest rates.The RBI's decision is a welcome relief for borrowers, who have long complained about the high cost of penal interest. The move is also likely to boost lending activity, as borrowers will now be less hesitant to take loans for fear of being hit with high penal charges.𝐇𝐞𝐫𝐞 𝐚𝐫𝐞 𝐬𝐨𝐦𝐞 𝐚𝐝𝐝𝐢𝐭𝐢𝐨𝐧𝐚𝐥 𝐝𝐞𝐭𝐚𝐢𝐥𝐬 𝐚𝐛𝐨𝐮𝐭 𝐭𝐡𝐞 𝐑𝐁𝐈'𝐬 𝐧𝐞𝐰 𝐫𝐮𝐥𝐞𝐬 𝐨𝐧 𝐩𝐞𝐧𝐚𝐥 𝐜𝐡𝐚𝐫𝐠𝐞𝐬: Penal charges will not be allowed to be capitalized, meaning that they will not be added to the outstanding loan amount.Lenders will be required to disclose the penal charges upfront, so that borrowers are aware of the charges before they take out a loan.The RBI will monitor the implementation of the new rules and take action against lenders who violate them.The RBI's new rules on penal charges are a positive step towards protecting borrowers from unfair lending practices. The move is also likely to make loans more affordable and accessible to borrowers.

Indian banks have written off Rs 14.56 L Cr in corporate loans between 2014-15 and 2022-23. Out of which 48.36%, was attributed to large industries and services. Actual amount recovered for the period was a mere 14.07% of the totalwrite-offs.Consequently, banks booked losses upwards of Rs 2 LCr over five consecutive years from 2015-16 to 2019-20.#indianbank #indianmarket #recoverycapital #corporatefinance https://lnkd.in/dKt_bga7

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Increased risk-weightage on unsecured loans and loans to NBFCs by Reserve Bank of India (RBI). Lenders need to be cautious in the personal loans segment. Lenders may need (https://lnkd.in/gG2nfZtZ)In simple word this is an important move by the RBI to increase risk-weightage on unsecured loans and bank loans to NBFCs. It shows the regulator's concern about the rapid growth of personal loans in India. Lenders will need to be cautious and may have to inject more capital to maintain capital adequacy ratios. Tighter under#newguidelines #rbi #nbfc

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Reserve Bank of India (RBI)'s crackdown on consumer loans set to spur co-lending between banks and NBFCsThe Reserve Bank of India (RBI)'s move is anticipated to push up the cost of borrowing from banks for NBFCs by 10-30 basis points, which the latter may look to mitigate through co-lending and increased exposure to the bond market.#reservebankofindia #aaa #bbb #colending #banking #nbfc #borrowing #lending https://lnkd.in/dKPMwkPM

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Personal loans are usually for immediate needs and aren't directly tied to creating more wealth or assets. Regulators, like the RBI, prefer loans that help grow the economy, like those for building factories or buying equipment. The RBI uses tools, like RWA provisioning, to make sure banks are lending safely. It's crucial for banks to use their funds wisely. If too many people take out personal loans too quickly, the RBI gets concerned. Every type of loan has its place, but it's important to have a balanced mix for a healthy economy. Why Shaktikanta Das wants India's banks to keep an eye on rising personal loans - The Economic Times

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RBI tightens norms for personal loans, credit cardsThe Reserve Bank of India (RBI) increased risk weights on consumer loans from banks, non-banking finance companies (NBFCs) and credit card providers, making it more expensive for lenders across the spectrum to offer loans in these segments. That will mean higher interest rates for all borrowers.Read more at:https://lnkd.in/g8cyFUig

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RBI increased risk weights for consumer credit exposure, excluding housing, education, vehicle and gold-backed loans, to 125%

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RBI hikes risk weights for unsecured personal loans and credit cards to 125% and 150%.Risk Weightage of Assets: A Quick 101 📘In banking, not all assets are created equal in terms of risk. To ensure banks have enough capital to cover potential losses, a risk weight is assigned to different types of assets. Higher-risk assets get a higher weight, meaning banks need to set aside more capital to cover them.RBI rules state that a minimum of 9% of loan value has to be set aside so that banks have a piece of the action to preserve if things go south. But in a recent circular RBI decided to increase the risk weights for personal loans and credit cards to 125% and 150%.Ex - If banks were disbursing Unsecured PL of Rs.100 they used to shell out 100%* (9% of Rs.100) Rs. 9 but with the recent hike, they have to shell out 125% * (9% of Rs.100) Rs. 11.25. This also comes after a staggering 48% growth in unsecured loans of ticket size Rs.10k-50k and a recent UBS report released this month which states that the share of lending to people who are already past their due dates has nearly doubled from 12% in FY19 to 23% in FY23. (Source)Economic Tightrope Walk 🎪RBI's move is essentially a balancing act on the economic tightrope. On one hand, they want to keep the financial system stable by acknowledging and covering the risks associated with unsecured lending. On the other hand, they aim to prevent the economy from overheating.Inspired by a recent Finshots article - RBI hikes interest rates without hiking interest rates!Open for feedback and queries.#bnpl #rbi #startupindia #productmanagement #finance

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In order to curb the observed upward trends in volatile personal loans and credit cards, the Reserve Bank of India (RBI) has instructed banks and nonbank financial corporations (NBFCs) to put aside increased capital against these trends. The compulsory risk weight has been raised by 25 percentage points. This will apply to volatile personal loans, credit cards, and lending to NBFCs. The regulations are intended to result in greater capital requirements for lenders and thereby.for more details click on https://lnkd.in/dqYy_qYR#RBILATESTNEWS#rbiupdate#loanconsultant

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