RBI proposes tighter revolving credit rules for farmers and businesses
The RBI is looking to tighten the rules around "revolving credit": the kind of loans you can keep borrowing from, like Kisan Credit Cards and SHG-linked loans.
While these have been a lifeline for many farmers and small businesses, the RBI's worried that easy access has led to risky lending and people taking on more debt than they can handle.
So, they're proposing clearer definitions and stricter checks to keep things in balance.
NBFC growth fuels risky lending
Revolving credit has grown fast, especially through NBFCs (nonbank lenders), but this boom comes with problems: weak background checks, borrowers juggling multiple loans, and money being used for spending instead of building income.
The RBI warns that if this goes unchecked, household debt could rise.
Policymakers now want lending to be more responsible, focusing on helping people grow their incomes while protecting both borrowers and the financial system.