Quote on the ramifications of RBI`s decision to increase the risk weight on consumer loans By Kishore Lodha, CFO - U GRO Capital
Below the quote on elaborated on the ramifications of RBI’s decision to increase the risk weight on consumer loans by Kishore Lodha, CFO – U GRO Capital
Kishore Lodha, Chief Financial Officer of U GRO Capital elaborated on the ramifications of RBI’s decision to increase the risk weight on consumer loans. He said, “UGRO’s customer base is registered MSMEs, having Udyam registrations, for both secured and unsecured loans with 100% Priority Sector Lending (“PSL”) loan book. Hence, UGRO would not have any additional risk weight on the underlying portfolio and the impact of the increased risk weights on capital adequacy ratio, Return on Equity and Return on Asset would be NIL. Fintechs could experience some challenges in fundraising and only those NBFCs that are aggressive in the retail loans segment (consumer financing and credit cards) may get impacted. The increase in the risk weight norms may make bank borrowings more expensive resulting in an 5-15 bps increase in the NBFCs’ borrowings from bank sources, subject to regulatory and liquidity conditions and they may veer towards instruments such as commercial papers (CPs) and non-convertible debentures (NCDs). Co-lending partnerships between banks and NBFCs will continue to grow.”
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