Risk weights have been revised, impacting commercial banks, SFBs, RRBs, and LABs. What does this mean for banks & borrowers? Let’s break it down. ð 1️⃣ Microfinance Loans & Risk Weights Earlier, consumer credit loans (like personal loans) had a 125% risk weight to curb excessive lending. Now, RBI has excluded microfinance loans from this, lowering their risk weight to 100%. 2️⃣ Who’s Affected? ✅ Commercial Banks & Small Finance Banks Microfinance loans as consumer credit now get 100% risk weight (instead of 125%). If they meet regulatory retail portfolio (RRP) norms, they can get 75% risk weight. ✅ RRBs & Local Area Banks (LABs) All microfinance loans will now have a 100% risk weight. 3️⃣ Why Does This Matter? Lower risk weights mean banks need less capital for microfinance loans. This could boost lending in the microfinance sector. RRBs & LABs get clarity on uniform risk treatment. 4️⃣ What Stays Unchanged? Consumer credit loans (personal loans, etc.) ...
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