The RBI’s action on unsecured lending may lead to more layoffs, potential mergers and acquisitions and improved talent density at fintechs, according to industry experts.
The central bank’s move was a step towards improving credit and portfolio quality in fintechs in the long run, according to Harshvardhan Lunia, chairman of the Fintech Convergence Council, a fintech industry body.
“This increase in capital requirement will also see large fintechs engage in fundraising endeavours, while some will need to reconsider their loan strategies and diversify their product offerings,” said Lunia, who is also the founder and chief executive officer of Lendingkart Technologies Pvt., a large unsecured business loan provider.
On Nov. 16, the RBI announced that unsecured retail loans extended by banks and non-banking financial companies will attract a credit risk weight of 125%, as compared with the previous 100%.
The central bank’s action didn’t come without warnings. On Oct. 6, RBI Governor Shaktikanta Das noted that certain components of personal loans were “recording very high growth.”
“These are being closely monitored by the Reserve Bank for any signs of incipient stress. Banks and NBFCs would be well advised to strengthen their internal surveillance mechanisms, address the build-up of risks, if any, and institute suitable safeguards in their own interests. The need of the hour is robust risk management and stronger underwriting standards,” he said.