{"id":33912,"date":"2024-03-07T16:31:02","date_gmt":"2024-03-07T11:01:02","guid":{"rendered":"https:\/\/blog.researchandranking.com\/?p=33912"},"modified":"2024-03-07T16:51:45","modified_gmt":"2024-03-07T11:21:45","slug":"5-4-unsecured-loans-rbi-cracks-down-on-nbfcs","status":"publish","type":"post","link":"https:\/\/www.equentis.com\/blog\/5-4-unsecured-loans-rbi-cracks-down-on-nbfcs\/","title":{"rendered":"5.4% Unsecured Loans: RBI cracks down on NBFCs"},"content":{"rendered":"
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The Reserve Bank of India (RBI) has been tightening its grip on some non-banking financial companies (NBFCs) and fintechs in the past few months, imposing various penalties, restrictions, and bans on their activities. <\/p>\n\n\n\n

The RBI’s actions have raised eyebrows in the industry, as some of these are among the leading players in the financial sector, including Paytm<\/a> Payments Bank, IIFL Finance, JM Financial, Bajaj Finance, and M&M Finance, catering to millions of customers across the country. <\/p>\n\n\n\n

Why is RBI concerned?<\/strong><\/h2>\n\n\n\n

According to Shymala Gopinath, former Deputy Governor of RBI, the central bank<\/a> may have been alarmed by the aggressive growth in the unsecured loans of some entities, which could threaten the financial system’s stability. She also said that the RBI strengthened its supervision after the global<\/a> financial crisis 2008 and has been more proactive in addressing the issues and concerns in the financial space.<\/p>\n\n\n\n

The practice of easy unsecured loans has led to some NBFCs and fintech reporting a spike in their non-performing assets (NPAs) or bad loans; 5.4% of borrowers<\/a> with at least one unsecured loan defaulted in April-June 2023, compared to 4.2% in the corresponding period last year. This could erode companies\u2019 capital and profitability.<\/p>\n\n\n\n

Aseem Dhru, Chief Executive Officer and Managing Director of SBFC, a fintech, said that the RBI has been sending a clear message to the industry that it will not tolerate any deviation from the regulatory norms and standards and will come down heavily on anything that is not in line. He added that the RBI’s action could also be a wake-up call for the fintechs and NBFCs to improve their governance, transparency, and customer protection.<\/p>\n\n\n\n

Actions RBI Has Been Taking<\/strong><\/h2>\n\n\n\n

The RBI’s regulatory hammer may positively impact the overall financial sector, as it could weed out the bad actors, enhance consumers’ trust and confidence, and promote a level playing field for the players. <\/p>\n\n\n\n