It is now going to be difficult to get top up on home loans and other secured loans. The Reserve Bank has taken a tough stand in this matter and has instructed banks and non-banking financial companies (NBFCs). The Reserve Bank says that people taking loans in the country are misusing top up.
Top up loans are increasing rapidly in India
The Governor of the Reserve Bank talked about this on Thursday after the first MPC meeting after the full budget. He said that the trend of top up loans is increasing very fast in India. Its growth is surprising. The Reserve Bank has come to know that people are using the money of top up loans for sightseeing or speculative trading, which can make loan recovery difficult.
Top ups are available on this type of loans
In fact, banks and non-banking financial companies often offer top up to customers taking secured loans. Secured loans are loans in which banks have the option of recovery. For example, home loans, car loans, gold loans etc. are called secured loans. In case of such loans, banks often offer top up to customers.
Banks are not following the rules properly
The Governor of the Reserve Bank says that while offering top up loans, the provisions set by banks and non-banking financial companies are not being followed properly. Banks and NBFCs etc. have to keep in mind factors like loan to value ratio, risk weight, monitoring of the end use of money while offering top up on any loan. Shaktikanta Das believes that many bodies are not following those provisions properly.
Borrowers are taking such risky steps
According to RBI Governor Das, borrowers are using the money of top up loan in works based on speculation or spending that money on unproductive reasons. Speculative trade with top up loan money refers to those cases in which a person tops up home loan or other secured loan from the bank and invests that money in stock market etc. on the basis of speculation. This is full of risk, that is why the Reserve Bank has shown strictness and has asked banks and NBFCs to be strict in the matter of giving top up loans.
