New RBI Guidelines on Personal Loans: What Changes for You

The RBI has increased risk weights on unsecured personal loans from 100% to 125%, impacting how banks lend to individuals.

What Changed? Banks now need to set aside 25% more capital for every personal loan they issue. This directly affects their profitability on these products, which means:

1. **Stricter eligibility** — Banks will be more selective about who they lend to. Expect higher minimum income requirements and CIBIL score thresholds. 2. **Slightly higher rates** — Some banks may increase interest rates by 25-50 basis points to maintain margins. 3. **Lower loan amounts** — Maximum loan amounts may be reduced for borderline applicants.

Who's Affected? - New personal loan applicants - Credit card applicants (particularly for high-limit cards) - NBFC borrowers (they faced a 25% increase in risk weights too)

What Should You Do? If you're planning to take a personal loan, apply sooner rather than later. Maintain a CIBIL score above 750 for the best rates. Consider secured loan alternatives like loan against FD or gold loan, which remain unaffected by these changes.

Silver Lining This is actually good for the broader economy — it prevents overleveraging and reckless lending, reducing the risk of a personal loan bubble.