India's NBFC body asks RBI to ease restrictions on revolving credit

MUMBAI: The representative body of India’s non-banking finance companies (NBFCs) has urged the Reserve Bank of India to reconsider the proposed blanket restriction on revolving credit products offered by NBFCs, according to a letter seen by Reuters. Earlier this month, RBI proposed to curb NBFCs from offering revolving loan products, unless they are authorised to issue credit cards. A revolving loan is a type of credit arrangement that allows borrowers to draw down, repay and re-draw loans within a predetermined credit limit. Small businesses typically use such facilities to buy raw materials and repay the amount after receiving payments from its customers, drawing again for the next production cycle. Under its draft guidelines, RBI said that NBFCs should only be allowed to offer term loans. The proposal followed concerns the central bank had raised around NBFCs offering high-risk loan products such as revolving credit lines, amid worries that borrowers may use such credit to repay existing dues, creating a cycle of debt. India’s RBI gives banks more flexibility in swapping overseas dollar deposits In a letter to the RBI on Thursday, the Finance Industry Development Council (FIDC)