The Reserve Bank of India’s plans to curb non-bank lenders from offering revolving credit could reshape product offerings, but Tata Capital expects limited impact due to their small exposure in this segment and readiness to comply with new regulations.
The Reserve Bank of India’s proposal to stop non-bank lenders from offering revolving credit could leave Tata Capital relatively insulated, with the company saying such products account for less than 5% of its loan book. Rajiv Sabharwal, Tata Capital’s chief executive, said on the sidelines of the FICCI FIBAC summit that the regulator had sought feedback and that the group would submit its response before any final decision. He added that the company would comply if the draft rules are adopted.
The proposed curbs, set out in a draft circular on August 6, would allow NBFCs to offer only term loans, not revolving credit lines, unless they are specifically authorised by the RBI to issue credit cards. At present, only SBI Cards and Payment Services, the State Bank of India subsidiary, and BobCard, the Bank of Baroda arm, fall into that exempt category. That means large diversified lenders such as Tata Capital and Bajaj Finance could be affected if the regulator proceeds with the change.
Analysts said the wider implications could reach beyond plain-vanilla loans. Shreya Khandelwal, research analyst at PL Capital, said reusable credit lines, overdrafts and flexi-loan products in corporate, MSME and unsecured personal lending could come under pressure. She warned that NBFCs may need to redesign products, with possible effects on customer appeal, fee income and overall economics, although diversified lenders may have more room to adapt.
The RBI’s move fits a broader pattern of caution around highly flexible borrowing. Earlier this year, Business Standard reported that the central bank had warned NBFCs about the risks of perpetual credit lines, including the danger of evergreening loans and weakening financial discipline. Industry executives also say the proposal could tilt the field towards banks by limiting a product that has become important for some NBFCs and fintech lenders, even as larger non-bank groups continue to broaden their businesses and look for growth in areas beyond lending.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
