New Delhi, March 8 (IANS) The Reserve Bank of India (RBI) may have some discomfort on Personal Loan on Credit Card (PLCC) as it could lead to higher customer leverage and drive some customers into the debt trap, Emkay Global Financial Services said.
Amid the central bank’s current clean-up drive, card ecosystem players suggest the RBI may have some issues (e.g. customer KYC and data proliferation) around rising partnerships with Fintechs to onboard customers, and possibly may call for some rule-based guidelines from the regulator.
Factoring the aggressive growth in unsecured loans, including credit cards (particularly low-ticket CC) and rising customer leverage, the RBI had already raised risk weights on CC to 150 per cent from 125 per cent and, thus, forced players to temper growth/set aside higher capital, the note said.
The RBI’s concerns are already manifesting via rising delinquencies across card players.
“We do not expect a full asset quality blow-out, as seen post Covid due to a lower share of the revolver book, but some concerns remain on Personal Loan on Credit Card (PLCC) and, thus, turn cautious on card players,” the note said.
Amid the RBI’s ongoing clean-up drive, it recently issued a final circular that instructed card issuers to provide a choice to customers to select the card network player after repetitive nudges, which again highlights its relentless focus on protecting customer interest and promote RuPay Cards’ acceptance.
Separately, the RBI had earlier increased risk weights on cards to 150 per cent from 125 per cent, amid aggressive card growth and rising risk of delinquencies in the unsecured loan segment, Emkay Global Financial Services said.
After a draft circular in July-23, the RBI has now issued a final circular that instructs credit card (CC) players to offer choice to customers to select their network provider (e.g.: Visa, Master Card, and RuPay), instead of pushing cards with a network partner based on their own preference and incentives.
Moreover, card issuers have been instructed not to enter into any explicit and restrictive agreements with card network providers, directly/indirectly (via incentives). In the past too, the RBI had nudged card issuers (banks/card companies) to follow this practice, but it was not followed in spirit; thus, the RBI has now formally issued a circular.
“The directives under the circular will become mandatory from 1-Oct-24, but we believe it will be interesting to see whether card players will be forced to offer a particular card on all networks with nearly the same reward/incentive structure or not”, the note said.
–IANS
san/svn
Disclaimer
The information contained in this website is for general information purposes only. The information is provided by TodayIndia.news and while we endeavour to keep the information up to date and correct, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the website or the information, products, services, or related graphics contained on the website for any purpose. Any reliance you place on such information is therefore strictly at your own risk.
In no event will we be liable for any loss or damage including without limitation, indirect or consequential loss or damage, or any loss or damage whatsoever arising from loss of data or profits arising out of, or in connection with, the use of this website.
Through this website you are able to link to other websites which are not under the control of TodayIndia.news We have no control over the nature, content and availability of those sites. The inclusion of any links does not necessarily imply a recommendation or endorse the views expressed within them.
Every effort is made to keep the website up and running smoothly. However, TodayIndia.news takes no responsibility for, and will not be liable for, the website being temporarily unavailable due to technical issues beyond our control.
For any legal details or query please visit original source link given with news or click on Go to Source.
Our translation service aims to offer the most accurate translation possible and we rarely experience any issues with news post. However, as the translation is carried out by third part tool there is a possibility for error to cause the occasional inaccuracy. We therefore require you to accept this disclaimer before confirming any translation news with us.
If you are not willing to accept this disclaimer then we recommend reading news post in its original language.
