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Unsecured lending risk weights
What it is
RBI raised risk weights on consumer credit from 100% to 125% in Nov 2023 and on credit card receivables to 150% for banks, then partially restored bank exposure weights to NBFCs in 2025
Higher risk weights force more capital per rupee lent, curbing growth without prohibiting it
Impact on industries
- Directly caps unsecured growth by making it capital-expensive, which is a blunter and faster brake than tightening underwriting standards
- The underlying concern is real - roughly half of unsecured borrowers already hold another retail loan, so a default cascades across secured books too
- The 2025 restoration of bank risk weights on NBFC exposure reopened funding, since banks lend more freely when the capital charge falls
- Slower growth improves portfolio quality and overlays provide a buffer - the measure is macroprudential, so relief follows once growth moderates