RBI Turns Spotlight Back on Unsecured Lending
The Reserve Bank of India has placed credit card and personal loan portfolios under renewed supervisory scrutiny, following a rise in 90-day overdue (NPA) ratios in the unsecured retail lending segment. RBI Supervision Wing issued a "Dear CEO" letter to the top 20 banks and NBFCs on March 10, asking for updated stress-test results on their unsecured retail books under an oil-shock scenario.
The Numbers Behind the Concern
Personal loan NPA ratios at the system level rose from 1.6% in September 2025 to 2.3% in December 2025 — still low by historical standards but representing a 44% deterioration over one quarter. Credit card overdue rates (30-day past due) have risen sharply among the self-employed segment and among borrowers in transportation-dependent occupations as fuel costs squeeze household budgets.
Risk Weight History
In November 2023, the RBI increased risk weights on unsecured consumer credit and credit card receivables from 100% to 125%, a move designed to slow growth and build additional capital buffers in this segment. That action successfully slowed growth from 28% YoY to 15% YoY. The RBI is now assessing whether the current 125% risk weight remains appropriate or whether a further increase to 150% is warranted given the deteriorating macroeconomic environment.
Impact on Banks
A further risk weight increase would require banks to set aside more capital per rupee of unsecured lending, effectively raising the cost of such loans and potentially forcing pricing increases. IndusInd Bank, which has one of the highest unsecured retail concentrations among mid-sized private banks, fell 4.3% on March 10 on concerns about potential regulatory tightening. HDFC Bank and Axis Bank also declined 1–2%.
