In response to the Reserve Bank of India's (RBI) recent revision of lending norms, fintech companies such as Zype and KreditBee are adjusting their loan portfolios to include more secured loans. The RBI's updated regulations have increased the risk weights on unsecured loans, excluding those for education, vehicles, housing, and gold, from 100% to 125%. This move is expected to slow down the growth of unsecured lending within the next six to twelve months, according to fintech projections.
The RBI's monetary policy committee meeting in October raised concerns about financial stability in light of an increase in unsecured lending. As a result, Zype is exploring digital-secure product options, while KreditBee is branching out into gold loans and priority sector lendings (PSLs), in addition to its loan against property (LAP) offerings. These strategic shifts aim to mitigate the risks associated with unsecured loans by creating a more balanced portfolio with at least a 40% focus on secured lending.
The rise in loan delinquencies, as reported by credit information company TransUnion (NYSE:TRU) Cibil, underscores the need for greater consumer financial literacy. Jatinder Handoo, CEO of the Digital Lenders Association of India (DLAI), has announced plans for corporate governance programs designed to improve cyber and financial awareness for everyone from executives to customers.
Fintech firms are anticipating that they will need to revise their credit policies and product suites due to the RBI's directive. These strategic adjustments are aimed at ensuring long-term financial stability and will likely be noticeable over the coming half-year as companies adapt to the increased lending costs brought about by higher capital requirements for unsecured borrowing.
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