RBI's revolving credit curbs could hit more lenders, warns industry

The non-banking financial sector has cautioned the Reserve Bank of India that proposed restrictions on revolving credit facilities could have broader implications than initially understood, affecting a wider array of lending products and lenders across the financial system.

Industry representatives have flagged concerns about the scope of the RBI's revolving credit curbs, seeking clarification on whether the regulations would apply to products featuring limited redraw provisions and supply-chain finance arrangements. These mechanisms, commonly used by financial companies to serve specific lending needs, could be inadvertently caught by the broader regulatory framework, industry bodies have warned.

A key area of uncertainty centers on whether debt recovery calls can continue to be made through the mandated 1600-number series, which has become standard practice for lenders. The industry is seeking explicit guidance on this operational aspect to ensure compliance while maintaining effective recovery mechanisms.

NBFCs have highlighted that without clear demarcation of which products fall within the purview of the restrictions, lenders face potential compliance challenges and uncertainty in business planning. The ambiguity could also affect customers relying on flexible credit arrangements for legitimate purposes, they have argued.

The RBI had introduced measures to regulate revolving credit products, but financial companies contend that specific categories of lending require separate treatment based on their structural differences and intended use cases. Industry stakeholders are awaiting detailed guidance and clarifications from the regulator to align their operations with the new framework.