Reserve Bank of India (RBI) deputy governor Swaminathan Janakiraman on Friday said the hike in risk weights on consumer lending is to end any sort of exuberance that may be exhibited by certain lenders.
“It is a pre-emptive measure to bring certain prudence and to bring an end to any sort of exuberance that may be exhibited by certain lenders. Efforts were made over the past three-four months by way of sensitising the players to put adequate internal control measures to ensure that the risk build-up is avoided,” Swaminathan says in a press conference after the monetary policy meeting. “As the market was not responding enough to that, there was a necessity that we watch the data and based on that data, we have taken certain prudential measures that the regulated entities have to put in place,” he says.
While it is too early to conclude, risk management practices are getting better, says the RBI deputy governor. “Any business model that is likely to throw up enhanced risk is curtailed. It is not to curtail growth. We have taken steps to exclude growth drivers like home loans, vehicle loans, etc,” he says.
These measures were intended to address the inter-connectedness that was building up within…
