RBI orders banks & NBFCs to back consumer loans with more capital. Banks have to also set aside more capital for loans to NBFCs. Capital reqt for consumer loans will go up by 25%. Also more board oversight and stricter rules for all consumer loans.

Housing,auto, education loans excused from higher capital reqt. NBFCs giving unsecured consumer loans most hit: their cost of funds will increase as banks charge more; Also NBFCs have to set aside more capital for consumer loans-eg SBI Cards, Baj Fin, Chola.

RBI TIGHTENS: Private banks like ICICIB, HDFCB, AxisB have enough capital headroom, but given RBI’s warning will likely lower consumer credit and NBFC loans. PSU banks, esp SBI have just about enough capital. They may have moderate pace of consumer credit.

RBI TIGHTENS: Volume drop in this high-return segment May dent profits of banks, NBFCs a bit. Also, some customers who were borrowing from one NBFC/bank to pay another, May default. Small rise in NPAs in consumer loans is possible. Equity derivative volumes may also fall