Mumbai, The Reserve Bank on Thursday tightened norms for unsecured personal loans for banks and non-banking financial companies. The revised norms wherein risk weights have been increased by 25 percentage points will not be applicable on certain consumer loans, including housing, education, and vehicle loans. Besides, the norms will not be applicable on loans secured by gold and gold jewellery. These loans will continue to attract 100 per cent risk weight. Higher risk weight implies that banks have to keep aside more money as buffer when it comes to unsecured personal loans. In simple words, a higher risk weight restricts banks' lending capacity. Recently, RBI Governor Shaktikanta Das had flagged the high growth in certain components of consumer credit and advised banks and Non-Banking Financial Companies (NBFCs) to strengthen their internal surveillance mechanisms, address the build-up of risks and institute suitable safeguards, in their own interest. The high growth seen in consumer credit and increasing dependency of NBFCs on bank borrowings were also highlighted by the governor during the interactions with MD/CEOs of major banks and large NBFCs in July and August, respectively. "On a review, it has been decided to increase the risk weights in respect of consumer credit exposure of commercial banks (outstanding as well as new), including personal loans, but excluding housing loans, education loans, vehicle loans and loans secured by gold and gold jewellery, by 25 percentage points to 125 per cent," the RBI said in a circular. The central bank has also increased the risk weights on credit receivables by 25 percentage points to 150 per cent and 125 per cent for banks and NBFCs, respectively.

RBI tightens norms on personal loans for banks, NBFCs

The <keyword id="30067" type="General" weightage="20" keywordseo="rbi" source="Orion">RBI</keyword>'s decision to tighten norms for unsecured <keyword id="35520" type="General" weightage="20" keywordseo="personal-loans" source="Orion">personal loans</keyword> is credit positive because lenders will need to allocate higher capital for such loans, thus improving their loss-absorbing buffers, <keyword id="6462970" type="General" weightage="20" keywordseo="moodys" source="Orion">Moody's</keyword> Investors Service said on Monday. The Reserve Bank last week raised risk weights on unsecured retail loans, credit cards and lending to non-banking finance companies (NBFCs) by 25 percentage points. Moody's said <keyword id="586043" type="General" weightage="20" keywordseo="unsecured-loans" source="Orion">unsecured loans</keyword> have been growing rapidly in the past few years, exposing financial institutions to a potential spike in credit costs in case of sudden economic or interest rate shocks. "The tightening of underwriting norms through higher risk-weighted assets is credit positive because lenders will need to allocate higher capitals for such loans improving their loss-absorbing buffers and may dampen their growth appetite," Moody's said in a statement. It said that over the past few years, India's unsecured lending segment has become very competitive, with banks, NBFCs and financial technology (fintech) companies, including several new entrants, aggressively growing loans in this category. In the past two years, personal loans grew around 24 per cent and credit card loans rose 28 per cent on an average compared with the overall banking sector's credit growth of around 15 per cent, Moody's said. "We expect banks would be able to absorb higher risk weights on their capital because the overall banking sector's exposure to unsecured retail credit is small at around 10 per cent of loans as of September 2023 and the sector's overall capitalization is at historically high levels with a Common Equity Tier 1 ratio of 13.9 per cent as of March 2023," Moody's said. However, the impact of the new underwriting rules could vary among individual lenders depending on their exposure to unsecured loans, it added. Last week, US-based S&amp;P Global Ratings had said that the RBI's decision to tighten norms for unsecured consumer credit is likely to hit banks' capital adequacy by 60 basis points. The move could lead to higher lending rates, lower credit growth and increase the need for capital raising among weak lenders, it added.

Higher risk weight on unsecured bank loans credit positive: Moody's

<ul><li>The effects of the RBI crackdown on easy <keyword id="35520" type="General" weightage="20" keywordseo="personal-loans" source="Orion">personal loans</keyword> is yet to be seen. </li><li>Despite a more than 25% decrease in acceptance rates, credit card balances have consistently increased. </li><li><keyword id="185013" type="General" weightage="20" keywordseo="gold-loans" source="Orion">Gold loans</keyword> stand out within the <keyword id="817163" type="General" weightage="20" keywordseo="retail-lending" source="Orion">retail lending</keyword> segment by providing the most favourable acceptance rates. </li></ul>Personal loans are on the rise. The month of December has seen the category in lending-verse amass outstanding balances of approximately ₹11 lakh crore, as per the Consumer Finance Overview by InCred Finance. Within the segment, the most rapid growth has been seen in small ticket personal loans (STPL), defined as loans under ₹25,000, witnessing a fourfold increase in volume over the past two years. Meanwhile, conventional personal loans, characterised by larger amounts and stricter underwriting criteria, have doubled in volume over the same period. It is to be noteworthy that in November, earlier this year, RBI increased the <a href="https://www.businessinsider.in/finance/news/rbi-tightens-norms-on-personal-loans-for-banks-nbfcs/articleshow/105269235.cms">risk weightage</a> for unsecured personal loans, and the effect is expected to be seen gradually. Retail lending trumps corporate lending Interestingly, retail lending, directed at individuals rather than businesses, now holds the foremost position and exhibits the most rapid growth within the credit landscape. Retail lending stands at approximately ₹89 lakh crores (around $1.1 trillion), constituting 46% of the overall credit in the economy. The report says that comparatively, corporate lending amounts to ₹74 lakh crores (about $0.9 trillion), securing the second largest segment. Retail balances are growing at a rate of 22% annually from a substantial base, outpacing the 17% growth of overall credit balances and the 14% growth of corporate balances. <keyword id="6387037" type="General" weightage="20" keywordseo="credit-cards" source="Orion">Credit cards</keyword> remain fastest growing retail lending category, despite decreased acceptance rates The fastest growing sector in retail lending remains credit cards. Despite a more than 25% decrease in acceptance rates and an industry-wide tightening of credit policies for new-to-credit customers, credit card balances have consistently increased. This appears to be a preemptive risk management step by lenders, as overall credit performance in the industry remains stable or even shows signs of improvement. A report by Worldline, a payment and transaction services company, highlighted a <a href="https://www.businessinsider.in/finance/news/indias-debit-card-transactions-fall-but-credit-card-spends-rise-further/articleshow/103960976.cms">surge in credit card transactions</a> in H1 2023, reaching 1.550 billion, signifying a significant increase of 19.6% compared to H1 2022. Loans for personal consumption drive retail lending The outstanding balances for consumer finance have crossed ₹22 lakh crores (approx. USD 270 billion). Despite this high base, balances continue to grow at over 25% per annum across most product categories. <table style="border-width: initial; border-style: none;"><colgroup></colgroup><col /><col /><tbody><tr><td colspan="2" style="border-left:solid #000000 0.75pt;border-right:solid #000000 0.75pt;border-bottom:solid #000000 0.75pt;border-top:solid #000000 0.75pt;vertical-align:bottom;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">Annual outstanding balance growth rate (%) </td></tr><tr><td style="border-left:solid #000000 0.75pt;border-right:solid #000000 0.75pt;border-bottom:solid #000000 0.75pt;border-top:solid #000000 0.75pt;vertical-align:bottom;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">Gold loans </td><td style="border-left:solid #000000 0.75pt;border-right:solid #000000 0.75pt;border-bottom:solid #000000 0.75pt;border-top:solid #000000 0.75pt;vertical-align:bottom;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">25 </td></tr><tr><td style="border-left:solid #000000 0.75pt;border-right:solid #000000 0.75pt;border-bottom:solid #000000 0.75pt;border-top:solid #000000 0.75pt;vertical-align:bottom;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">Car loans </td><td style="border-left:solid #000000 0.75pt;border-right:solid #000000 0.75pt;border-bottom:solid #000000 0.75pt;border-top:solid #000000 0.75pt;vertical-align:bottom;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">26 </td></tr><tr><td style="border-left:solid #000000 0.75pt;border-right:solid #000000 0.75pt;border-bottom:solid #000000 0.75pt;border-top:solid #000000 0.75pt;vertical-align:bottom;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">Personal loans </td><td style="border-left:solid #000000 0.75pt;border-right:solid #000000 0.75pt;border-bottom:solid #000000 0.75pt;border-top:solid #000000 0.75pt;vertical-align:bottom;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">29 </td></tr><tr><td style="border-left:solid #000000 0.75pt;border-right:solid #000000 0.75pt;border-bottom:solid #000000 0.75pt;border-top:solid #000000 0.75pt;vertical-align:bottom;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">Two-wheeler loans </td><td style="border-left:solid #000000 0.75pt;border-right:solid #000000 0.75pt;border-bottom:solid #000000 0.75pt;border-top:solid #000000 0.75pt;vertical-align:bottom;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">31 </td></tr><tr><td style="border-left:solid #000000 0.75pt;border-right:solid #000000 0.75pt;border-bottom:solid #000000 0.75pt;border-top:solid #000000 0.75pt;vertical-align:bottom;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">Consumer loans </td><td style="border-left:solid #000000 0.75pt;border-right:solid #000000 0.75pt;border-bottom:solid #000000 0.75pt;border-top:solid #000000 0.75pt;vertical-align:bottom;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">33 </td></tr><tr><td style="border-left:solid #000000 0.75pt;border-right:solid #000000 0.75pt;border-bottom:solid #000000 0.75pt;border-top:solid #000000 0.75pt;vertical-align:bottom;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">Credit cards </td><td style="border-left:solid #000000 0.75pt;border-right:solid #000000 0.75pt;border-bottom:solid #000000 0.75pt;border-top:solid #000000 0.75pt;vertical-align:bottom;padding:0pt 5pt 0pt 5pt;overflow:hidden;overflow-wrap:break-word;">34 </td></tr></tbody></table> Source: InCred <keyword id="1897540" type="General" weightage="20" keywordseo="consumer-durable-loans" source="Orion">Consumer durable loans</keyword> see rapid growth Consumer durable loans, akin to STPL loans in terms of loan amounts, are experiencing rapid growth. However, the distinction lies in their controlled use case, where disbursements are directly made to the merchant. The risk performance of these loans earmarked for consumer durables has shown stability. Gold loans continue to shine Gold loans also stand out within the retail lending segment by providing the most favourable acceptance rates, which is natural since it is a secured loan. Banks have observed a rapid increase in their unsecured loan portfolios, raising concerns by the Reserve Bank of India (RBI). Responding to the RBI's worries about the growth of unsecured loans, specific banks are swiftly shifting their attention toward encouraging secured lending. Among these, gold loans have emerged as an attractive financial product within the retail sector. This shift aims to mitigate risk by promoting lending backed by collateral rather than unsecured lending, aligning with the RBI's cautionary stance.

Retail trumps corporate lending as small-ticket loans see fourfold jump in past two years

<ul><li><keyword id="6359111" type="General" weightage="80" keywordseo="shaktikanta-das" source="Orion">Shaktikanta Das</keyword> said that the recent measures to tighten <keyword id="19528809" type="General" weightage="20" keywordseo="personal-loan-norms" source="Orion">personal loan norms</keyword> are pre-emptive, calibrated and targeted.</li><li>The governor is of the view that banks and NBFCs are increasingly relying on high-cost short term bulk deposits, while the tenure of the loans is getting elongated.</li><li>Lenders must not rely solely on pre-set algorithms while lending through analytics, the regulator said. </li></ul>The governor of <keyword id="6354335" type="General" weightage="50" keywordseo="reserve-bank-of-india" source="Orion">Reserve Bank of India</keyword> (RBI) Shatikanta Das said on Wednesday that the recent measures taken to tighten personal loan norms were pre-emptive, calibrated and targeted. Speaking at an event in Mumbai, Das also suggested banks, shadow banks and other financial entities stress test their books. “In fact, there is a strong case for companies in the real sector also to stress test their businesses and balance sheets,” said Das. Last week, RBI increased the <a href="https://www.businessinsider.in/finance/news/rbi-tightens-norms-on-personal-loans-for-banks-nbfcs/articleshow/105269235.cms">risk weightage for unsecured loans </a>given out by banks and non-banking financial institutions (NBFCs). But education, auto, housing and MSME loans were left out of the new norms. Real estate companies have been on an expansion spree, after the sector was re-energized since the pandemic. ‘Avoid all forms of exuberance’ The governor who was speaking at the FIBAC conference also had a few suggestions for banks and NBFCs who are enjoying the phase of high credit growth. Credit expansion and its pricing should be in sync with risks, and all forms of exuberance must be avoided, he advised. He also said that banks and shadow banks must strengthen their asset liability management and give greater attention to their liabilities side. “In certain cases, we have observed increased reliance on high cost short term bulk deposits while the tenure of the loans, both in retail and corporate loans, is getting elongated,” Das said. Das also pointed out that certain NBFCs-MFIs appear to be enjoying relatively higher net interest margins. “It is indeed for micro finance lenders to ensure that the flexibility provided to them in setting interest rates is used judiciously. They are expected to ensure that interest rates are transparent and not usurious,” he said. Banks too were warned of their exposure to NBFCs, who regularly borrow from banks. “Though the banks are well capitalised, they must constantly evaluate their exposure to NBFCs and the exposure of individual NBFCs to multiple banks. The NBFCs on their part should focus on broad basing their funding sources and reducing overdependence on bank funding,” he added. ‘Re-test your analytics, algorithms’ Lending institutions have been adopting digitalization at a rapid pace. They have not only eased access, increased reach of banking services but also helped institutions bring down operational costs. Here too, Das sounded a word of caution, especially with regards to model-based lending through analytics. They must not rely solely on pre-set algorithms as assumptions based on which the models operate, he observed and suggested they’re calibrated from time to time with fresh information. “It is necessary to be watchful of any undue risk build up in the system due to information gaps in these models, which may cause dilution of underwriting standards,” Das said. SEE ALSO <a href="https://www.businessinsider.in/personal-finance/news/the-dark-truth-behind-rbis-crackdown-on-easy-personal-loans/articleshow/105287366.cms">The dark truth behind RBI’s crackdown on easy personal loans</a> <a href="https://www.businessinsider.in/finance/news/rbi-tightens-norms-on-personal-loans-for-banks-nbfcs/articleshow/105269235.cms">RBI tightens norms on personal loans for banks, NBFCs</a>

RBI governor asks realty companies to stress test their books

<ul><li>RBI tightens capital norms for lenders disbursing unsecured loans like <keyword id="35520" type="General" weightage="20" keywordseo="personal-loans" source="Orion">personal loans</keyword>, credit card receivables.</li><li>Experts say that the central bank aims to stem unsecured loan growth which has been growing at 26% for the last five years.</li><li>The move might also have a spillover effect on fintechs who aggressively push <keyword id="9522245" type="General" weightage="20" keywordseo="bnpl" source="Orion">BNPL</keyword> schemes.</li></ul>The Reserve Bank of India tightened capital norms for lenders disbursing unsecured loans to unsuspecting borrowers on Thursday evening and there is a rationale behind this move. Given the slowdown in corporate loans, banks have been chasing retail customers for loans. Such has been the rush to offer loans that top-ups are being offered even on auto loans which is just a camouflaged unsecured credit. For example, Suresh Chandra (name changed) had a ₹15 lakh car loan that had to be paid off in 12 months. Before he could repay his existing auto loan, he was being inundated by banks and NBFCs luring him into taking more loans. A large private bank offered him a top-up loan that’s akin to the value of his car, and another wanted to offer a loan that was 150% of the part of the loan that had already been paid off. “Sometimes I get tempted to take up on these offers. Also because technically auto loan interest is lower and they’re offering the top-ups at the same rate. If I need money, I will surely take this up instead of a new personal loan,” Chandra told Business Insider India. Giving a top-up loan is a good way for banks and NBFCs to push across new loans to borrowers. A top-up loan is an additional credit that’s given over and above an existing loan and when opting for a balance transfer. It doesn’t come with end-use restrictions and requires minimum documentation. Now, India’s central bank has cracked down on lenders to stall this aggressive loan push to consumers on Thursday by tightening capital norms. Not only has it classified top-up loans as unsecured loans, it also increased risk weight on unsecured loans like personal loans, credit card receivables, consumer credit and more such. It will make it tougher for them to give out loans as easily and freely to consumers. RBI puts up a ‘STOP’ sign Banks and NBFCs have been giving out too many unsecured loans. Unsecured retail loans have been growing at a 26% compounded annual growth rate (CAGR) between FY18 to FY23, as per Nomura. In FY18, unsecured retail loans were 7.8% of bank credit and now they’re as high as 10.6%. All this has happened by chasing after consumers for loans. “We view this as a clear signal from the regulator that it wants to bring down the strong growth in these segments, which is being brought into effect by bringing about an increase in the effective cost of capital for lending to these segments,” says a report by Nomura. Experts say that RBI’s move will control the increasing delinquencies and high risks associated with lending in the unsecured loan segment. Due to increased risk weightage, lenders should have to cover for more credit risk in the unsecured loan segment and it will make lending more expensive. The loans will also turn more expensive for borrowers. “RBI has been cognizant of the high increase in unsecured lending and initial delinquency trends seen in the unsecured loan segment. While this might look like a small piece in the overall picture, the RBI is cautious enough to take an early step in controlling the same,” says Ameet Venkeshwar, chief business officer at LoanTap. The credit standards will also get tighter, experts hope. Most top banks offer personal loans at interest rates ranging between 10-26% depending on creditworthiness. These loans can go as high as ₹20 lakh and the minimum income limit has to be ₹30,000 to become eligible for such loans. Personal loan interest rates and processing fees <table style="border-width: initial; border-style: none;" class="redcator-table-advance"><colgroup></colgroup><col /><col /><col /><col /><tbody><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Lender </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Interest Rate p.a. </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Processing Fee </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Loan tenure </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">HDFC BANK </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">10.5-21% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Up to 2.5% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">12-60 months </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">ICICI BANK </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">10.5-16% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Up to 2.5% + GST </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Up to 60 months </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">HOME CREDIT CASH LOAN </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">24-34% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">2.5-5% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Up to 48 months </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">ADITYA BIRLA CAPITAL </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">14-26% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Up to 2% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">12-72 months </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">AXIS BANK </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">10.49-22% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Up to 2% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Up to 60 months </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">SBI </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">11.05-14.05% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Up to 1.5% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Up to 72 months </td></tr></tbody><tbody></tbody><tbody></tbody></table>Source: Bank websites and Bankbazaar Thou shall not tempt The free flow of personal loans has been pushing credit culture in the country. Preeti Mishra, a professional from Mumbai has a similar story. “I swiped as much as ₹50,000 on my debit card to pay my child’s school fees. Immediately, I got a call from my bank offering to convert that payment into a loan which can be paid off in installments. Why would I want to take a loan which I can afford to pay?” she says. Like Chandra, she also says that it’s fairly tempting. “Even if I was in a tad bit of a money crunch, I would have taken up the loan. And, in the long run, it would have made it tougher for me,” she worries that one bad day she might actually fall into a trap. Sumanto Roy is one such who has fallen into it, and now swimming at the deep end. The 27-year-old earns ₹60,000 per month. He already has a car loan that takes away ₹10,000 per month, another ₹8,000 as EMI for his phone and another ₹12,000 goes off his bank account every month as his laptop EMI. If Roy wasn’t living with his parents, he would have found it very tough to get by with this loan burden. “It’s difficult to pay off my credit card bill every month. I roll it over by making the minimum payment. Now, I am saving and trying to pay off my dues as fast as possible,” he tells Business Insider India adding that the loan burden is distressing him personally. Will BNPL hold on? However, banks and NBFCs are one side of the aggressive loan push story. There is a rising number of Buy Now Pay Later startups, companies that integrate EMIs while checking out of e-commerce websites, and VC-funded startups that loan for people who borrow to go on a holiday or a date. Experts believe that RBI’s move might change the dynamics of some of these fintechs to some extent. Jefferies expects PayTm’s consumer loan disbursal growth to normalize from around 90% in FY24 to 40% in FY25 and 35% in FY26. “For Paytm's lending partners, higher funding costs and increased capital requirements will affect product profitability in BNPL/PL. They may respond by tightening credit standards and/or moderating growth from elevated levels right now,” Jefferies says. Giving loans is a good business in today’s world where GenZs, especially are focussed more on ‘experiences’, want to live the good life. On the other hand, the new-age apps advertise in a buzzing manner day in and day out with taglines like — ‘Download, pay your credit card bills and earn rewards’. The lure of loan was always there. At the end of the day, lenders are different when you take the loan, and when it’s the time to pay up. Sooner or later, they would want their pound of flesh right at the heart. SEE ALSO <a href="https://www.businessinsider.in/business/news/wine-vs-tea-indias-consumption-trends-show-a-sharp-divergence/articleshow/104810168.cms">Wine vs Tea: India’s consumption trends show a sharp divergence</a> <a href="https://www.businessinsider.in/business/news/bitten-by-inflation-indians-buying-fewer-clothes-this-season/articleshow/105179140.cms">Bitten by inflation, Indians buying fewer clothes this season</a>

The dark truth behind RBI’s crackdown on easy personal loans

<ul><li>Bank lending to NBFCs was growing at 24-25% y-o-y, whereas the rest of the system was growing at 12-14%. </li><li>Interconnectedness is building in the system and <keyword id="30067" type="General" weightage="100" keywordseo="rbi" source="Orion">RBI</keyword> moves intend to address that. </li><li>RBI governor said that its preemptive measures are intended to proactively take action before the bubble bursts.</li></ul>India’s central bank intends to cut down consumption led-loans given out by banks and shadow banks. Reserve Bank of India’s deputy governor <keyword id="10055827" type="General" weightage="50" keywordseo="swaminathan-janakiraman" source="Orion">Swaminathan Janakiraman</keyword> said that its intention behind increased risk weightage on unsecured loans is to cut down growth of loans which do not have a clearly defined end use. Some segments’ growth within NBFCs are outliers, and the measures taken are to address that. <keyword id="162353" type="General" weightage="80" keywordseo="swaminathan" source="Orion">Swaminathan</keyword> insists that per se, small ticket loans are no risk to the system. “The loans in the under ₹50,000 segments is less than half a percent of total outstanding. They may be dealing with a lot of people, it’s a segment that cannot pose a great risk to the system,” he said while speaking at the post-monetary policy press conference on Friday. Last month, RBI asked banks and non-banking financial institutions (NBFCs) to provide more for unsecured loans, under which personal loans are covered. This measure also addresses interconnectedness building in the system where banks are lending to NBFCs. Bank lending to NBFCs was growing at 24-25% y-o-y, whereas the rest of the system was growing at 12-14%. “Bank lending to NBFCs had to be re-caliberated. The idea is not to deny liquidity or ration the lending,” said Swaminathan. He also added that the business models of some of these institutions will be re-caliberated along with their growth numbers. “Risk measure protection and underwriting practices are getting better. It’s too early to comment on the effect it has had. Governance and effectiveness of assurance functions is top of our priority. You will hear more from us on that,” said the deputy governor. <cmsannotation type="cmsannotation" annotationid="To take action before bubble bursts" comment="subhead" text="To take action before bubble bursts">To take action before bubble bursts</cmsannotation> The RBI governor <keyword id="6359111" type="General" weightage="50" keywordseo="shaktikanta-das" source="Orion">Shaktikanta Das</keyword> also insisted that this move is a preemptive measure to address potential risks. “We don’t wait for the house to catch fire and then act. Our effort is to proactively take action before the bubble bursts,” Das said in his speech. Apart from keeping policy rates unchanged, the RBI’s rate-setting panel also remained focussed on withdrawal of accommodation. It has also kept its projections on inflation for FY24 unchanged at 5.4%, and also warned that the November print of inflation might come in higher. Inflation management cannot be on auto-pilot even as the future is expected to be clouded by uncertain food prices. But Das also said that summer of 2022 is behind us. The RBI also increased its GDP growth projection for FY24 to 7% from 6.5% earlier. “There is growing international confidence in the Indian economy, as we speak to other central bank governors and some large investors. There is confidence from the point of view of investment, quality of Indian products and its service exports,” Das said at the conference. SEE ALSO: <a href="https://www.businessinsider.in/finance/news/rbi-expects-indias-gdp-to-grow-at-7-in-fy24-keeps-repo-rate-unchanged/articleshow/105828012.cms">RBI expects India’s GDP to grow at 7% in FY24; keeps repo rate unchanged</a> <a href="https://www.businessinsider.in/finance/news/rbi-hikes-upi-transaction-limit-for-education-and-healthcare/articleshow/105832824.cms">UPI transaction limit for education and healthcare hiked to ₹5 lakh per day</a>

We’d like to curtail consumption-led loans with no clear end use: RBI Dy Governor

<ul><li>Unified regulatory framework on connected lending aims to strengthen pricing and management of credit by regulated entities.</li><li>Experts believe that this move is related to bank lending to NBFCs.</li><li><keyword id="30067" type="General" weightage="20" keywordseo="rbi" source="Orion">RBI</keyword> will also come up with a regulatory framework for web-aggregation of loan products. </li></ul> The Reserve Bank of India (RBI) said on Friday that it will come up with a unified regulatory framework on connected lending for the entities it regulates. This move is to strengthen the pricing and management of credit by regulated entities. “The extant guidelines on connected lending are limited in scope,” said Shaktikanta Das, governor of RBI said in his speech where he announced that the Monetary Policy Committee <a href="https://www.businessinsider.in/finance/news/rbi-expects-indias-gdp-to-grow-at-7-in-fy24-keeps-repo-rate-unchanged/articleshow/105828012.cms">has decided to keep repo rates unchanged</a>. RBI’s deputy governor Rajeshwar Rao clarified at the press conference that the regulations do not refer to interconnectedness. “Connected lending refers to persons who are in the position to control the decision of the lender,” he said, without giving any more details. Das said that it refers to cases where the director of a bank borrows from the same bank and can have some influence. It also refers to cases of related parties as well, he clarified. “It has nothing to do with interconnectedness,” Das said. The central bank has recently increased the risk weightage on unsecured loans given out by banks and NBFCs. “It’s a pre-emptive measure to address potential risks. We don’t wait for the house to catch fire and then act,” said Das. Neutrality and transparency to web-aggregators of loans The RBI also said it will lay down a regulatory framework for web-aggregation of loan products. Das said that he has noticed that such loan products are harming consumer interest and the framework is expected to result in enhanced customer centricity and transparency in digital lending. This move is a follow-up to the recommendations they received from the working group on digital lending norms, says Rabi Shankar, deputy governor of RBI. The Reserve Bank had introduced a regulatory framework for digital lending in August/September 2022. The digital lending ecosystem also comprises of services that aggregate loan offers from lenders (called web-aggregation of loan products) for guidance of customers. “Lenders on web platforms get their information from various sources and give weightage to customers. Sometimes they might miss something,” added Shankar. Das said that the move will bring neutrality, transparency and avoid mis-selling and also not influence the decision of the borrower. SEE ALSO <a href="https://www.businessinsider.in/stock-market/markets/news/nifty-scales-21000-as-stocks-rally-and-rbi-mpc-hikes-growth-forecast/articleshow/105829753.cms">Nifty scales Mount 21,000 as RBI hikes growth forecast</a> <a href="https://www.businessinsider.in/finance/news/rbi-expects-indias-gdp-to-grow-at-7-in-fy24-keeps-repo-rate-unchanged/articleshow/105828012.cms">RBI expects India’s GDP to grow at 7% in FY24; keeps repo rate unchanged</a>

RBI to come up with unified regulatory framework on connected lending

<ul><li>Loans of ₹75 lakh and above to have a risk weightage of 50% up from 35% earlier. </li><li>This could lead to an increase in <keyword id="173069" type="General" weightage="20" keywordseo="home-loan-interest" source="Orion">home loan interest</keyword> rates for <keyword id="35519" type="General" weightage="20" keywordseo="home-loans" source="Orion">home loans</keyword> of ₹75 lakh and above. </li><li>Homebuyers should review their finances and evaluate their ability to make a higher down payment. </li></ul>Those looking to take a home loan of ₹75 lakh or more, brace themselves to fork out a higher EMI on your loan. On October 12, 2020, the Reserve Bank of India revised the risk weights for individual housing loans by connecting them with the loan to value (LTV) ratios for all new housing loans authorized until March 31, 2022. It said that all individual housing loans shall attract a risk weight of 35%, if their loan-to-value ratio is at 80% or lower. Earlier, in June 2017, the Reserve Bank of India had implemented a staggered risk weights system for individual housing loans that varied according to the size of the loans. In case of home loans above ₹75 lakh, the risk weights were set at 50%. Post-October 12, 2020, even for loans for ₹75 lakh and above, the riks weight ratio was 35%. In April 2022, RBI proposed to extend the lower risk weights on home loans for another year till March 31, 2023. However, there has been no further extension. “The most recent Economic Survey stated that housing prices have started to firm up after a two-year Covid lull and unsold inventories have declined on the rise in demand. So there are no further extensions to the lowered risk weights,” says Adhil Shetty CEO, BankBazaar, an online financial services marketplace. “Overall, risk weights are an important factor in determining the amount of capital that banks need to hold against their assets. However, their impact on home loan pricing may be less significant compared to other factors such as creditworthiness, loan-to-value ratios, and prevailing market conditions,” says Shetty. Financial institutions like banks use the technique of risk weightage on loans to calculate the level of capital that they need to keep in reserve for a specific loan or set of loans. The risk weightage of a loan, which is a measure of the perceived risk of default, affects loan pricing and availability. When loans are assigned a higher risk weightage, it requires more capital to be held against them. Loans with higher risk weightage are priced higher to compensate for the increased cost of capital, resulting in higher interest rates or fees for borrowers. Furthermore, higher risk weightage can limit access to credit for certain borrowers as lending institutions may be less willing to extend loans to borrowers who do not have a good credit history. The impact on high-value home loans: The risk weight ratio thus gains importance, especially in the case of high value loans. “Changes to risk weightings and LTV ratios can affect the lending practices of financial institutions and may impact the availability and cost of credit for borrowers. A higher risk weighting may make it more difficult or expensive for borrowers to obtain loans, especially for more expensive homes,” says Prashant Thakur, senior director and head of research, Anarock Group, a real estate consultant firm. Increasing the risk weighting from 35% to 50% for LTV ratio less than 80% means that banks will have to hold more capital against these loans, which may make the cost of capital more expensive for them to offer mortgages. “This, in turn, could lead to an increase in interest rates for borrowers, including those seeking to purchase houses priced at ₹75 lakh and above,” says V Swaminathan, executive chairman, Andromeda loans, a loan distributor. This will mean the costs of owning property will go up. High interest rates mean that the EMI per lakh goes up. For a 20-year loan, the EMI per lakh has gone up by 20%+ from ₹775 to ₹932 per lakh. Higher interest rates would mean that this EMI could go up even further. If someone does not have the capacity to pay high EMIs, the loan tenure for a high value loan could exceed 50 years, so one needs to be prepared to shell out a higher EMI. What it means for borrowers: Borrowers will have to be prepared to shell out more from their own savings and depend less on borrowings. “Homebuyers should review their finances and evaluate their ability to make a higher down payment. They should ensure that they have enough savings to cover the down payment and other associated expenses of home buying,” says Swaminathan. To evaluate your home loan repayment capacity, you need to consider factors such as your income, monthly expenses, existing loans, credit history, and down payment. By using a home loan EMI calculator, you can estimate your monthly EMI based on the loan amount, tenure, and <keyword id="37018" type="General" weightage="20" keywordseo="interest-rate" source="Orion">interest rate</keyword>. Considering these factors will help you choose a home loan that fits your budget. This also makes it more important to have a good credit score to get a loan on favourable terms. SEE ALSO <a href="https://www.businessinsider.in/business/news/how-to-ensure-your-home-loan-is-paid-off-before-retirement/articleshow/99106468.cms">Rising interest rates hitting you hard? Here’s how to ensure your home loan is paid off before retirement</a> <a href="https://www.businessinsider.in/finance/news/monetary-policy-impact-rbis-pause-to-support-real-estate-demand-particularly-affordable-segment/articleshow/99290486.cms">Monetary Policy Impact: RBI’s pause to support real estate demand - particularly affordable segment</a>

Looking for a home loan of ₹75 lakh or above? The RBI rate hike pause might not bring you relief

Credit <keyword id="113124" type="UNKNOWN" weightage="100" keywordseo="rating-agencies">rating agencies</keyword> in India have been caught in a windstorm of downgrades, defaults and bad loans. On one hand, <keyword id="35210" type="ORGANIZATION" weightage="100" keywordseo="sebi">SEBI</keyword>, the regulator for the securities market in India has asked these agencies to explain their actions on <keyword id="6368075" type="CITY" weightage="100" keywordseo="RCom">RCom</keyword> bonds so that it can be ascertained whether the correct process was followed. The regulator also wants to know what led to the downgrade of the company's debt securities and loans. On the other hand, country’s apex bank <keyword id="6354335" type="CITY" weightage="100" keywordseo="reserve-bank-of-india">Reserve Bank of India</keyword> (<keyword id="30067" type="ORGANIZATION" weightage="100" keywordseo="RBI">RBI</keyword>), has also asked agencies whether they could rate restructured loans, which would lead to regulatory and market implications that several agencies are not completely comfortable with. "SEBI wants to know whether investors could have been alerted and rating actions could have been initiated earlier... what lead to cascading downgrades was delay in information," a person aware of the development told <a href="http://economictimes.indiatimes.com/markets/stocks/policy/sebi-questions-delay-in-reliance-communications-downgrade-agencies-blame-lack-of-default-info/articleshow/58991307.cms">ET</a>. "Rating agencies have no access to loan default data - something they feel banks and RBI should share," the person added. In a meeting with rating agencies, RBI brought up the subject on rating of bank loans to corporate, which currently is undergoing a complex debt reshuffle programme that might involve the debut of a new investor or a deal to monetise assets. Even though agencies are convinced to rate such loans or securities, they don’t want to publish these ratings. However, as per rules implemented by SEBI, such private ratings are not allowed, keeping in mind the benefit of investments and market participants. BANKS CAN BENEFIT However, a rating upgrade of the debts of companies that are going through restructuring would certainly benefit banks facing mounting bad loans. "A higher and above-investment grade rating would lower risk weightage on these loans. This would improve their capital adequacy and thus require the government to infuse less capital. One can understand where RBI is coming from," said another person.

Why was RCom’s downgrade delayed, asks SEBI

<keyword id="2947589" type="UNKNOWN" weightage="20" keywordseo="Droom">Droom</keyword> has launched India’s first marketplace to get auto loan for used automobiles. <keyword id="4412414" type="UNKNOWN" weightage="20" keywordseo="Droom-Credit">Droom Credit</keyword> is end-to-end online and fully automated credit marketplace to get loan approval in 30 seconds with its own proprietary credit risk engine, unbeatable credit terms, paperless process, and fully automated work-flow management. The platform aims to capitalise on its world-class technological and data science capabilities to make the loan assessment process fully dynamic, hassle-free, and paperless to facilitate near-instant loans from lenders to borrowers. As part of the initiative, Droom has on-boarded BFSIs comprising commercial banks, <keyword id="6354598" type="ORGANIZATION" weightage="20" keywordseo="NBFCs">NBFCs</keyword>, and other financial entities with its initial service rollout. A proprietary algorithm-based credit risk management engine is used to power this consumer credit marketplace. <div type="embedgroup"> <div type="Article" hostid="261" msid="58163436" title="This is what will happen if Snapdeal gets acquired by Flipkart" rank="1.0" kind="RELATED" publishDate="Apr 13, 2017, 4:16 PM" mstype="2" mssubtype="0"></div></div>
 How does it work The platform conducts comprehensive loan assessment through its algorithm which computes multiple raw data points to analyse the creditworthiness of an applicant. This includes leveraging the India Stack i.e. Aadhaar, e-Sign and Digital Locker. The Marketplace also uses, PAN verification, credit score validation, income statement authentication, along with many other variables for objective, unbiased and instant credit evaluation. The proprietary algorithm comes up with an accurate credit decision within 30 seconds for 95% of the transactions. The decision also includes approximately 5% pre-approved applications that require further lender-side inspection. Thereupon, approved and pre-approved applicants are required to choose a lender with appropriate credit terms which comprise factors such as amount, duration, interest rates, and down payment. The application of the candidate is subsequently forwarded to the selected lender along with the assessment report.<div type="embedgroup"> <div type="Article" hostid="261" msid="58166464" title="BankBazaar data shows 126% increase in financial decisions online by women" rank="1.0" kind="RELATED" publishDate="Apr 13, 2017, 6:09 PM" mstype="2" mssubtype="0"></div></div>
 How does it help the lender Apart from the assessment report, Droom Credit comes equipped with Store Manager, a lender’s dashboard, raitngs and reviews, lender/buyer KYC and self-configurable credit risk panel . Store Manager grants higher flexibility and greater command to the lenders over the loan origination process. It allows lenders to modify profile settings, set credit terms, post document requirements, and set or manage credit risk profiles, along with other vital features. They can also override default algorithmic settings for all categories through the Store Manager. By doings so, lenders can set their own scores and weightages for their desired buckets. The platform will initially cater to automobile loans including used and new vehicles with a vision of becoming India’s most comprehensive, unbiased and independent way of acquiring instant loans. <div type="embedgroup"> <div type="Article" hostid="261" msid="58132345" title="Exclusive: Here’s what Google VP Rajan Anandan said about Jio’s Impact on the Telecom Sector" rank="1.0" kind="RELATED" publishDate="Apr 11, 2017, 8:55 PM" mstype="2" mssubtype="0"></div></div>
 Droom Credit gives buyers/borrowers the freedom to apply for loan anytime, anywhere using any device. There’s the flexibility to apply for a loan 24x7 not just following the traditional hours of 10 – 5. We keep user at the centre of everything, to ensure borrower and lender are equally benefited by this technological revolution. Lenders will no more have the headache of collecting the hard paper documentation, compiling files and explicitly checking the credit history.

Droom Launches Droom Credit – A Facility to get Auto Loan for Used Automobiles

<ul><li>Bank’s capital adequacy ratio levels on account of the recent changes in risk weightage increase on select loans were manageable.</li><li>The bank is focused on building a business that can provide a sustainable improvement in risk-adjusted returns.</li><li>Bank continues to be well funded to continue investing in growth. Loan growth unlikely to be impacted by RBI crackdown on personal loans. </li></ul><keyword id="6355975" type="General" weightage="20" keywordseo="axis-bank" source="Orion">Axis Bank</keyword> will not need to raise more capital after the <keyword id="6354335" type="General" weightage="50" keywordseo="reserve-bank-of-india" source="Orion">Reserve Bank of India</keyword> mandated banks to increase capital buffers for personal loans. Addressing select analysts this week, Axis Bank CEO <keyword id="247960" type="General" weightage="20" keywordseo="amitabh-chaudhry" source="Orion">Amitabh Chaudhry</keyword> said that the capital adequacy ratio levels on account of the recent changes in risk weightage increase on select loans were manageable and there was no immediate need to raise capital. The bank's senior management conveyed that the bank’s current capital levels were adequate for growth (for next year) and protection (rating agency actions). However, it did say that loan growth could scale down in a few of these segments. The bank has not been a big source of funds to non banking finance companies, which is the impact of RBI’s actions would be minor on that front as well. The bank’s management conveyed to analysts that some of these unsecured loans would become pricier following the increase in risk weightage on these loans. According to Kotak Institutional Equities, “There are no near-term concerns that need to be flagged off on asset quality or credit costs, but they are likely to gradually increase from the current historically low levels.” Over the medium-term, the bank will continue to build on its existing GPS (growth, profitability &amp; sustainability) strategy. The bank plans to concentrate on a mix of products and experiences for customers spread across the length and breadth of India. The bank is focused on building a business that can provide a sustainable improvement in risk-adjusted returns. Analysts said that the key takeaway was that the bank has the ability to keep investing in its franchise. Some of these investments have been driven by the tailwind of strong revenue growth and lower credit costs (due to lower bad loan accretion), which can reverse in the next few years. But the probability of the bank reporting a volatile credit cost as seen in the corporate NPL cycle appears to be low at this stage of the cycle, says Kotak. A key lever of growth for the bank is its higher deposit accretion. The bank has been growing deposits at 300-4000 basis points higher than peers in FY24. The bank expects to continue with this momentum. According to <keyword id="19603548" type="General" weightage="50" keywordseo="systamatix-institutional-equities" source="Orion">Systamatix Institutional Equities</keyword>, “Deposit growth has been 4-5% higher than industry with 6% market share in incremental deposits. Deposit growth has been 4-5% higher than industry with 6% market share in incremental deposits. The bank remains focused on profitability and hence deposit pricing is likely to be in line with the NIM and ROE targets going ahead,” says the brokerage. Within unsecured lending, the bank remains focussed on existing customers of the bank to fuel its growth in advances. Axis Bank has said that it will avoid low ticket loans for growth and yet expects to grow above the sector growth which is likely to be 12-14% in FY25. The bank expects its net interest margin to settle at 3.8% and remain in the region consistently.

Don’t need to raise more capital immediately, says Axis Bank’s CEO Amitabh Chaudhry

<ul><li><keyword id="30067" type="General" weightage="20" keywordseo="rbi" source="Orion">RBI</keyword>’s MPC keeps <keyword id="43352" type="General" weightage="20" keywordseo="repo-rate" source="Orion">repo rate</keyword> unchanged for the fifth time in a row.</li><li>Most economists had unanimously expected a ‘pause’ for the fifth consecutive time.</li><li>A few economists also expected the MPC to change its stance to ‘neutral’ from withdrawal of accommodation. </li></ul>The Reserve Bank of India (RBI)’s Monetary Policy Committee unanimously decided to keep the repo rate unchanged at 6.5% for the fifth consecutive time on Friday. The central bank also revised its GDP growth projections for FY24 to 7% instead of 6.5% it had projected earlier. This is after the second quarter’s GDP however threw in a surprise by coming in at 7.6%, much higher than RBI’s forecasts of 6.5%. RBI’s real GDP growth forecast table <table style="border-width: initial; border-style: none; table-layout: fixed; width: 468pt;" class="redcator-table-advance"><colgroup></colgroup><col /><col /><col /><col /><tbody><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Period of time </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">RBI earlier forecast </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Revised estimates </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Actual GDP growth </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">FY24 </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">6.6% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">7% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">NA </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Q1 FY24 </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">8% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">NA </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">7.8% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Q2 FY24 </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">6.5% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">NA </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">7.6% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Q3 FY24 </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">6% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">6.5% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">NA </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Q4 FY24 </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">5.7% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">6% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">NA </td></tr></tbody><tbody></tbody><tbody></tbody><tbody></tbody><tbody></tbody></table>‘We don’t wait for the house to catch fire’ The MPC also decided to remain focussed on ‘withdrawal of accommodation’. This is to ensure inflation progresses along the target of 4%, said <keyword id="6359111" type="General" weightage="20" keywordseo="shaktikanta-das" source="Orion">Shaktikanta Das</keyword>, governor of RBI. It has also kept FY24’s CPI inflation projections unchanged at 5.4%. Addressing the central bank’s decision to increase risk weightage on unsecured loans, the governor said it’s a pre-emptive measure to address potential risks. “We don’t wait for the house to catch fire and then act,” Das said in his speech. The central bank has to be mindful of the risk of being carried away by a few months of good data. “We have to be watchful of new shocks that can hit the economy from anywhere anytime” he said. Das also said that as the new year begins, the long awaited normalcy eludes the global economy. “In such volatile times, emerging markets have remained resilient to volatility," he said. Experts expected the ‘pause’ Food inflation, which accounts for nearly half of the overall consumer price basket, rose 6.61% in October as compared with 6.56% in September. Consumer Price Index (CPI) is also expected to come around 5.4-5.5% by March 2023, though November and December inflation could overshoot 6%. Says Mandar Pitale, head- treasury, SBM Bank India, “Overall data prints released after October MPC are supportive for MPC to continue with its current “withdrawal of accommodation” stance. The MPC is also likely to maintain the status quo on rates in the forthcoming policy announcement.” A few also expected RBI’ MPC to change its stance to ‘neutral’ from withdrawal of accommodation. However, this may not happen just yet as the governor has been insisting on bringing inflation within its target of 4%. A note by Yes Bank says that the 4% inflation target continues to elude, the only option for the RBI is to hold policy rates and keep the stance of ‘withdrawal of accommodation’ unchanged. “Given its (RBI) worry on the personal credit space, the RBI is also unlikely to change its thoughts on tight liquidity conditions. While liquidity conditions are difficult to predict given volatility in flows, we think there ought to be more clarity on OMOs and the plans around the same,” said Yes Bank. Sheersham Gupta, director and senior technical analyst at Rupeezy said that the spread of lending rates and repo rate have also been narrowing down in the past couple of months, indicating a more direct transmission of monetary policy.

RBI expects India’s GDP to grow at 7% in FY24; keeps repo rate unchanged

New Delhi, HDFC Chairman <keyword id="6448020" type="General" weightage="50" keywordseo="deepak-parekh" source="Orion">Deepak Parekh</keyword> on Friday exuded confidence that the synergies between <keyword id="6357149" type="General" weightage="80" keywordseo="hdfc-bank" source="Orion">HDFC Bank</keyword> and the group companies will deepen with the bank taking on the mantle of ownership of the group following the reverse merger likely to be effective from Saturday. As chairman of HDFC Ltd, Parekh in the last message to the shareholders said home loans will now be complemented with HDFC Bank's core strengths -- its sales engine, execution capabilities at scale and deep insights on consumer behaviour. The reverse merger of parent HDFC Ltd with HDFC Bank is expected to be effective from July 1. "For HDFC Bank, a home loan customer marks the beginning of a journey of having a customer in perpetuity. HDFC Bank is excited at the prospect of cross-selling an array of asset and liability products to home loan customers. This will be done seamlessly on their digitalisation platforms - all through a one-click experience," he said. HDFC Bank's vast distribution network will be better harnessed for both home loans and the group companies, he said. "The confidence I derive is the agreed tenet of this integration --preserving the fabric of the 'HDFC way of working'. This has also been publicly articulated by the leadership at HDFC Bank," he said. What the future holds, only time will tell, he said, adding, the biggest risk organisations face today is staying with the status quo, believing what worked well yesterday will continue in the future. Change takes courage as it displaces one from the cocoon of comfort and familiarity, he said. Parekh said it is time for him to hang his boots and expressed hope for an exciting future and prosperity. "It is my time to hang my boots with both anticipations and hopes for the future. While this will be my last communication to shareholders of HDFC, rest assured we now stride tall into a very exciting future of growth and prosperity," he said. Parekh earlier this week had said that June 30 will be his last working day after spending 46 years at the Corporation and when asked what he will do after the board meeting, he jokingly quipped. "I will have a few drinks". Observing that working on a merger of this scale has been challenging and rewarding, he said, "yet, what amazed us the most has been the immense goodwill and strong relationships that HDFC as a group has." The approvals by the <keyword id="139820" type="General" weightage="50" keywordseo="competition-commission" source="Orion">Competition Commission</keyword> of India, the <keyword id="6354457" type="General" weightage="50" keywordseo="national-company-law-tribunal" source="Orion">National Company Law Tribunal</keyword>, the shareholders and the regulators were important merger milestones. "In all our dealings pertaining to the merger, the HDFC group has been treated in a fair and just manner. We stand committed to adhering to the prerequisites as stipulated by the regulators, respecting the fact that these decisions are made keeping in mind the best interests of the Indian financial ecosystem," he said. As HDFC hands the baton, he wished that the core founding values of kindness, fairness, efficiency and effectiveness gets woven deeper into the fabric of the HDFC group. Termed as the biggest transaction in the history of India Inc, HDFC Bank on April 4, 2022, agreed to take over its parent, which is the largest pure-play mortgage lender, in a USD 40-billion all-stock deal, creating a financial services titan with a combined asset of over Rs 18 lakh crore. The combined shares of the HDFC twins will have the highest weighting on the indices at close to 14 per cent, much higher than the present index heavyweight <keyword id="6355199" type="General" weightage="50" keywordseo="reliance-industries" source="Orion">Reliance Industries</keyword> with a 10.4 per cent weightage. Once the deal is effective, HDFC Bank will be 100 per cent owned by public shareholders, and existing shareholders of HDFC will own 41 per cent of the bank. Every HDFC shareholder will get 42 shares of HDFC Bank for every 25 shares they hold.

Time to hang my boots says Deepak Parekh in his last letter to HDFC shareholders

<ul><li>Global investment firm Nomura's model portfolio is heavily skewed towards blue chip stocks. </li><li>Four stocks -- Reliance Industries, HDFC Bank, ICICI Bank, Axis Bank, L&amp;T and HCL Tech-- make up for nearly 50% of all the investments.</li><li>There is also added emphasis on companies focussed on infrastructure construction. </li></ul>Investing in stock markets can tricky in these volatile times. Sentiment is swaying from one extreme to another driven by changes at home -- the ₹1.45 trillion sweeping tax cuts announced by Finance Minister Nirmala Sitharaman-- and evolving global risks like <a href="https://www.businessinsider.in/Trump-impeachment-odds-skyrocket-to-62-on-popular-betting-website/articleshow/71285122.cms" data-type="tilCustomLink" target="_blank">the risk of Donald Trump's impeachment</a>, the US-China trade war, a possible spike in oil prices to name a few. Small investors can take cues from the likes of global investment firm Nomura's model portfolio, as of September 20, while planning their investments. The portfolio and the allocation shared below also spells out the estimated earnings growth in the next two years. <table style="width: 392pt;"> <colgroup></colgroup><col /> <col /> <col /> <tbody><tr> <td class="xl63" style="height:15.75pt;width:139pt">Sector/Stock</td> <td class="xl64" style="border-left-width: initial; border-left-style: none; width: 97pt;">Portfolio weightage</td> <td class="xl64" style="border-left-width: initial; border-left-style: none; width: 156pt;">Earnings growth estimate FY19-21</td> </tr> <tr> <td class="xl65" style="height: 15.75pt; border-top-width: initial; border-top-style: none;">Automobiles</td> <td class="xl66" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">3.40%</td> <td class="xl67" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">-13%</td> </tr> <tr> <td class="xl68" style="height: 15.75pt; border-top-width: initial; border-top-style: none;">Mahindra &amp; Mahindra</td> <td class="xl66" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">2.20%</td> <td class="xl67" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">18%</td> </tr> <tr> <td class="xl68" style="height: 15.75pt; border-top-width: initial; border-top-style: none;">Minda Industries</td> <td class="xl66" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">1.20%</td> <td class="xl69" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;"> </td> </tr> <tr> <td class="xl65" style="height: 15.75pt; border-top-width: initial; border-top-style: none;">Materials</td> <td class="xl66" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">1.30%</td> <td class="xl67" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">48%</td> </tr> <tr> <td class="xl68" style="height: 15.75pt; border-top-width: initial; border-top-style: none;">Ultratech Cement</td> <td class="xl66" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">1.30%</td> <td class="xl68" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;"> </td> </tr> <tr> <td class="xl65" style="height: 15.75pt; border-top-width: initial; border-top-style: none;">Consumption</td> <td class="xl66" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">9.10%</td> <td class="xl68" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;"> </td> </tr> <tr> <td class="xl65" style="height: 15.75pt; border-top-width: initial; border-top-style: none;">Financials</td> <td class="xl66" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">34.80%</td> <td class="xl68" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;"> </td> </tr> <tr> <td class="xl68" style="height: 15.75pt; border-top-width: initial; border-top-style: none;">ICICI Bank</td> <td class="xl66" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">10.80%</td> <td class="xl67" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">140%</td> </tr> <tr> <td class="xl68" style="height: 15.75pt; border-top-width: initial; border-top-style: none;">Axis Bank</td> <td class="xl67" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">7%</td> <td class="xl67" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">69%</td> </tr> <tr> <td class="xl68" style="height: 15.75pt; border-top-width: initial; border-top-style: none;">ICICI Prudential Life Insurance</td> <td class="xl66" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">2.50%</td> <td class="xl67" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">19%</td> </tr> <tr> <td class="xl68" style="height: 15.75pt; border-top-width: initial; border-top-style: none;">State Bank of India (SBI)</td> <td class="xl66" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">3.50%</td> <td class="xl69" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;"> </td> </tr> <tr> <td class="xl68" style="height: 15.75pt; border-top-width: initial; border-top-style: none;">HDFC Bank</td> <td class="xl67" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">11%</td> <td class="xl67" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">20%</td> </tr> <tr> <td class="xl65" style="height: 15.75pt; border-top-width: initial; border-top-style: none;">Infrastructure/Industrials</td> <td class="xl66" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">13.10%</td> <td class="xl69" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;"> </td> </tr> <tr> <td class="xl68" style="height: 15.75pt; border-top-width: initial; border-top-style: none;">Larsen &amp; Toubro</td> <td class="xl66" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">6.50%</td> <td class="xl67" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">17%</td> </tr> <tr> <td class="xl68" style="height: 15.75pt; border-top-width: initial; border-top-style: none;">Concor</td> <td class="xl67" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">2%</td> <td class="xl67" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">2%</td> </tr> <tr> <td class="xl68" style="height: 15.75pt; border-top-width: initial; border-top-style: none;">KNR Constructions</td> <td class="xl66" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">2.20%</td> <td class="xl67" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">10%</td> </tr> <tr> <td class="xl68" style="height: 15.75pt; border-top-width: initial; border-top-style: none;">AIA Engineering</td> <td class="xl66" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">1.50%</td> <td class="xl67" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">18%</td> </tr> <tr> <td class="xl68" style="height: 15.75pt; border-top-width: initial; border-top-style: none;">VA Tech Wabag</td> <td class="xl66" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">0.90%</td> <td class="xl67" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">34%</td> </tr> <tr> <td class="xl65" style="height: 15.75pt; border-top-width: initial; border-top-style: none;">IT Services</td> <td class="xl66" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">12.60%</td> <td class="xl69" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;"> </td> </tr> <tr> <td class="xl68" style="height: 15.75pt; border-top-width: initial; border-top-style: none;">HCL Technologies</td> <td class="xl66" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">5.20%</td> <td class="xl67" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">9%</td> </tr> <tr> <td class="xl68" style="height: 15.75pt; border-top-width: initial; border-top-style: none;">Mphasis</td> <td class="xl66" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">3.70%</td> <td class="xl67" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">9%</td> </tr> <tr> <td class="xl68" style="height: 15.75pt; border-top-width: initial; border-top-style: none;">Tech Mahindra</td> <td class="xl66" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">3.70%</td> <td class="xl67" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">3%</td> </tr> <tr> <td class="xl65" style="height: 15.75pt; border-top-width: initial; border-top-style: none;">Oil &amp; Gas</td> <td class="xl66" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">14.20%</td> <td class="xl69" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;"> </td> </tr> <tr> <td class="xl68" style="height: 15.75pt; border-top-width: initial; border-top-style: none;">GAIL</td> <td class="xl66" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">3.20%</td> <td class="xl67" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">9%</td> </tr> <tr> <td class="xl68" style="height: 15.75pt; border-top-width: initial; border-top-style: none;">Indraprastha Gas</td> <td class="xl67" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">1%</td> <td class="xl67" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">21%</td> </tr> <tr> <td class="xl68" style="height: 15.75pt; border-top-width: initial; border-top-style: none;">Reliance Industries</td> <td class="xl67" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">10%</td> <td class="xl67" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">20%</td> </tr> <tr> <td class="xl65" style="height: 15.75pt; border-top-width: initial; border-top-style: none;">Healthcare</td> <td class="xl66" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">6.60%</td> <td class="xl69" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;"> </td> </tr> <tr> <td class="xl68" style="height: 15.75pt; border-top-width: initial; border-top-style: none;">Dr Reddy's Labs</td> <td class="xl66" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">3.20%</td> <td class="xl67" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">2%</td> </tr> <tr> <td class="xl68" style="height: 15.75pt; border-top-width: initial; border-top-style: none;">Lupin</td> <td class="xl66" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">1.30%</td> <td class="xl67" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">41%</td> </tr> <tr> <td class="xl68" style="height: 15.75pt; border-top-width: initial; border-top-style: none;">Glenmark Pharma</td> <td class="xl66" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">1.10%</td> <td class="xl67" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">11%</td> </tr> <tr> <td class="xl68" style="height: 15.75pt; border-top-width: initial; border-top-style: none;">Apollo Hospitals</td> <td class="xl67" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">1%</td> <td class="xl67" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">59%</td> </tr> <tr> <td class="xl68" style="height: 15.75pt; border-top-width: initial; border-top-style: none;">Metals &amp; Mining</td> <td class="xl69" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">0</td> <td class="xl69" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;"> </td> </tr> <tr> <td class="xl68" style="height: 15.75pt; border-top-width: initial; border-top-style: none;">Power/Utilities</td> <td class="xl66" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">4.30%</td> <td class="xl69" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;"> </td> </tr> <tr> <td class="xl68" style="height: 15.75pt; border-top-width: initial; border-top-style: none;">Telecom</td> <td class="xl69" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">0</td> <td class="xl69" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;"> </td> </tr> <tr> <td class="xl68" style="height: 15.75pt; border-top-width: initial; border-top-style: none;">Others</td> <td class="xl66" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">0.70%</td> <td class="xl69" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;"> </td> </tr></tbody></table> Interestingly, while there are 23 stocks in the portfolio, the allocation prescribed is heavily skewed towards a handful of stocks -- namely Reliance Industries, HDFC Bank, ICICI Bank, Axis Bank, L&amp;T and HCL Tech-- which make for nearly 50% of the allocation-- showing the sharp difference in the prospects of Indian companies. In terms of sectors, the highest allocation is to companies focussed on infrastructure construction. This may be a bet on government's willingness to spend more of taxpayers' money to boost economic growth. The zero weightage given to telecom may reflect the battered prospects of the sector amidst intense competition, piled up debt, and the imminent pressure of having to bid for 5G spectrum when the auction opens up in the coming weeks. Some stocks like ICICI Bank and Axis Bank are expected to more than double their profits in the next couple but that is largely due to the low-base effect in the last financial, which was marred by rising bad loans and provisions. The return to normalcy may look better when compared to the performance last year. The three IT stocks -- HCL Tech, Mphasis, and Tech Mahindra-- are expected to give the highest return on equity, above 20% each, according to the estimates in the model portfolio of stocks. This model portfolio may give one a perspective on how to invest their surplus profitably. SEE ALSO: <a href="https://www.businessinsider.in/corporate-tax-cut-in-india-is-subject-to-giving-away-these-exemptions-and-incentives/articleshow/71243364.cms" data-type="tilCustomLink" target="_blank">Indian companies have to forego these exemptions to enjoy the $6 billion benefit from lower taxes</a> <a href="https://www.businessinsider.in/cut-in-bank-deposit-rates-will-hurt-financial-savings-of-indian-families/articleshow/71075369.cms" data-type="tilCustomLink" target="_blank">Family savings in India face the threat of more interest rate cuts</a>

These five stocks make up for half of Nomura's model portfolio

<ul><li>The central government has asked the <keyword id="30067" type="ORGANIZATION" weightage="20" keywordseo="RBI">RBI</keyword> to dilute its Prompt Corrective Action (<keyword id="6383105" type="UNKNOWN" weightage="20" keywordseo="pca">PCA</keyword>) framework to increase the flow of credit to small-and-medium-sized enterprises. </li><li>The RBI is reportedly mulling a plan to allow some state-run banks to leave the PCA programme ahead of time if they demonstrate a turnaround in their <keyword id="463915" type="PERSON" weightage="20" keywordseo="non-performing-asset">non-performing asset</keyword> ratios and profitability. </li><li>The <keyword id="6358156" type="ORGANIZATION" weightage="20" keywordseo="central-bank">central bank</keyword> is also expected to relax certain requirements imposed on all banks with regards to secured and unsecured loans to SMEs.</li></ul>The current <a href="https://www.businessinsider.in/the-spat-between-indias-central-bank-and-the-government-gets-more-heated-as-the-finance-minister-blames-it-for-not-doing-enough-to-prevent-the-countrys-bad-loan-problem/articleshow/66442846.cms">clash</a> between India’s central bank and the BJP-ruled government has roiled markets and stoked fears among investors. Thankfully, the two parties may reach a compromise as the board of the Reserve Bank of India (RBI) prepares to sit down on 19 November. In the wake of the recent IL&amp;FS crisis and the drying up of funds at the nation’s non-banking financial companies, the central government has asked the RBI <a href="https://www.businessinsider.in/indias-government-wants-to-dilute-an-important-corrective-programme-for-the-nations-struggling-lenders-and-the-central-bank-is-having-none-of-it/articleshow/66411552.cms">to dilute its Prompt Corrective Action (PCA) framework</a> so as to increase the flow of credit to small-and-medium-sized enterprises (SME). This framework is aimed at putting certain lending and operational restrictions on banks with high rates of non-performing assets. After initially refusing to loosen restrictions under the framework, it appears that the RBI might be open to meeting the central government halfway in this regard. BI is reportedly mulling a plan to allow some state-run banks to leave the PCA programme ahead of time in the event that they demonstrate a turnaround in their non-performing asset ratios and profitability, sources told <a href="https://indianexpress.com/article/india/restrictions-on-banks-rbi-and-govt-work-to-narrow-their-gap-5445145/">the Indian Express</a>. As per the RBI’s current norms, struggling banks are only taken off the watchlist after reporting a net profit for two consecutive years. The central government has not presented its proposal as a dilution, however. It has maintained that is asking the RBI to bring the PCA programme in line with the intervention programmes of global central banks and the international <keyword id="142572" type="PERSON" weightage="20" keywordseo="Basel-III">Basel III</keyword> risk framework. It has also argued that the PCA framework needs to be revised because a restriction on lending, a core operation, prevents a bank from increasing its profits. Around 11 of India’s 21 state-run banks are on the PCA watchlist, which places limits on the extension of loans, branch expansion and issue of dividends. As a result of restrictions on these banks, SMEs have suffered from <a href="https://www.businessinsider.in/indias-small-businesses-are-suffering-from-a-shortage-of-credit-options/articleshow/63683278.cms">a slowdown in financing.</a> In addition, the central government is also pushing for the RBI to reduce the capital-to-risk-weighted assets ratio, a key indicator of financial stability, that it imposes on the nation’s banks from 9% to the 8% prescribed by the Basel III framework. The move could give state-run banks an additional ₹550 billion of funds for lending purposes, Anil Gupta, the head of credit ratings agency ICRA, <a href="https://www.bloombergquint.com/business/government-pushing-to-relax-capital-requirement-norms-for-banks#gs.IM5s1ns">told BloombergQuint</a>. Finally, the RBI is also expected to relax certain requirements imposed on all banks with regards to secured and unsecured loans to SMEs. In line with international standards, India’s central bank could lower the risk weightage, which influences the amount of capital set aside, for SME loans to 75% from a current level of 150%. SME loans are considered more risky than loans to larger companies and hence require higher risk provisioning. While the RBI could accede the government’s requests keeping in view the dire <keyword id="6355375" type="DEFINITION" weightage="20" keywordseo="Liquidity">liquidity</keyword> situation in the short term, it will be wary of precipitating a further build-up in bad loans. The current risk requirements are a preventive measure that were implemented in response to the burgeoning bad loan problem in India’s banking sector. It’s a classic case of the conflict between a short term boost to the economy and long term stability. Given that we’re headed for general elections, it isn’t difficult to ascertain which one will win out. SEE ALSO: <a href="https://www.businessinsider.in/the-spat-between-indias-central-bank-and-the-government-gets-more-heated-as-the-finance-minister-blames-it-for-not-doing-enough-to-prevent-the-countrys-bad-loan-problem/articleshow/66442846.cms">The spat between India’s central bank and the government gets more heated as the finance minister blames the RBI for not doing enough to prevent the country’s bad loan problem</a> <a href="https://www.businessinsider.in/indias-government-wants-to-dilute-an-important-corrective-programme-for-the-nations-struggling-lenders-and-the-central-bank-is-having-none-of-it/articleshow/66411552.cms">India’s government wants to dilute an important corrective programme for the nation’s struggling lenders — and the central bank is having none of it</a> <a href="https://www.businessinsider.in/the-reserve-bank-of-india-is-trying-to-prevent-a-liquidity-crisis-at-banks-by-relaxing-an-important-risk-requirement/articleshow/65978953.cms">The Reserve Bank of India is trying to prevent a liquidity crisis at banks by relaxing an important risk requirement</a>

You Searched For "risk weightage loans" and got 15 results

RBI tightens norms on personal loans for banks, NBFCs

PTI

Higher risk weight on unsecured bank loans credit positive: Moody's

PTI

Retail trumps corporate lending as small-ticket loans see fourfold jump in past two years

Anagh Pal

RBI governor asks realty companies to stress test their books

Katya Naidu

The dark truth behind RBI’s crackdown on easy personal loans

Katya

Anagh

We’d like to curtail consumption-led loans with no clear end use: RBI Dy Governor

Katya Naidu

RBI to come up with unified regulatory framework on connected lending

Katya Naidu

Looking for a home loan of ₹75 lakh or above? The RBI rate hike pause might not bring you relief

Anagh Pal

Why was RCom’s downgrade delayed, asks SEBI

BI India Bureau

Droom Launches Droom Credit – A Facility to get Auto Loan for Used Automobiles

Tanya Dubey

Don’t need to raise more capital immediately, says Axis Bank’s CEO Amitabh Chaudhry

BI India Bureau

RBI expects India’s GDP to grow at 7% in FY24; keeps repo rate unchanged

BI India Bureau

Time to hang my boots says Deepak Parekh in his last letter to HDFC shareholders

PTI

These five stocks make up for half of Nomura's model portfolio

Sriram Iyer

An end to the spat between the RBI and the government could be in sight as the board of the central bank prepares to meet next week

Dilsher Dhillon