RBI's Risk-Weighted Assets Rule

The podcast explains the Reserve Bank of India's (RBI) new rules on risk-weighted assets. These rules require banks to set aside a minimum of 9% of their own capital for contingencies. However, the regulators assign risk weights to assets based on their perceived riskiness. For example, home loans may have a risk weight of 50% because of the collateral involved, while personal loans have a risk weight of 100% because they are unsecured. The RBI has recently increased the risk weights for unsecured personal loans and lending to non-banking financial companies (NBFCs) to 125% and 150% respectively, in an effort to curb excessive lending and address rising defaults.