Lok Sabha Question No. 2491 (UNSTARRED), answered on 2025-08-04
Subject: National Level Framework for Responsible Lending and Fair Pricing
Ministry: FINANCE
Asked by: Thiru Dayanidhi Maran

## GOVERNMENT OF INDIA MINISTRY OF FINANCE

## DEPARTMENT OF FINANCIAL SERVICES

## LOK SABHA UNSTARRED QUESTION NO. 2491

ANSWERED ON MONDAY, AUGUST 4, 2025/SRAVANA 13, 1947 (SAKA)

## NATIONAL LEVEL FRAMEWORK FOR RESPONSIBLE LENDING AND FAIR PRICING

## 2491.  THIRU DAYANIDHI MARAN:

Will the Minister of Finance be pleased to state:

- (a) whether the Government has any plans to incentivize household savings into bank deposits to ensure long-term financial system stability in light of the persistent divergence between loan and deposit growth;
- (b) whether  regulatory  tweaks  being  considered  to  balance  liquidity  without  distorting  credit availability;
- (c) whether the Government's view on introducing complementary fiscal buffers or coordinated liquidity tools to pre-empt systemic liquidity shocks in view of the RBI's intent to recalibrate the Liquidity Coverage Ratio (LCR) norms;
- (d) whether the Government is contemplating a national-level framework for responsible lending and  fair  pricing  in  small-ticket  loans,  especially  for  vulnerable  borrowers  considering  the growing stress in unsecured retail credit and microfinance segments; and
- (e) whether the Government foresee the need for a disclosure-based oversight mechanism to monitor systemic interconnectedness and potential contagion risks as private credit markets grow rapidly outside the traditional regulatory net?

## ANSWER

## THE MINISTER OF STATE FOR FINANCE (SHRI PANKAJ CHAUDHARY)

(a) to (e) The Government has undertaken comprehensive measures in recent years to enhance credit accessibility and promote financial inclusion. These include, inter alia ,  universal access to banking facilities through the Pradhan Mantri Jan Dhan Yojana (PMJDY), expansion of digital banking  infrastructure,  and  enhancement  of  financial  awareness  across  segments.  As  a  result, deposit  mobilisation  has  been  strengthened and  the overall health  of  the  financial  system  has improved. As per provisional data of the Reserve Bank of India (RBI), as on March 2025, the year- on-year  growth  in  deposits  and  credit  of  Scheduled  Commercial  Banks  (SCBs)  showed  a divergence of merely one basis point, indicating macro-level alignment and a positive outlook for the financial sector.

The Reserve Bank of India (RBI), as the monetary authority, actively manages liquidity conditions through instruments such as the Liquidity Adjustment Facility (LAF), Standing Deposit Facility (SDF), Marginal Standing Facility (MSF), Variable Rate Reverse Repo (VRRR), and Open Market Operations (OMOs). These operations aim to inject or absorb liquidity, as warranted, to align system liquidity with the monetary policy stance, support efficient credit allocation, and preserve financial stability.

With regard to liquidity standards, the RBI has informed that it has issued revised guidelines on the Liquidity Coverage Ratio (LCR) vide circular dated 21.04.2025. The revised norms, effective from 01.04.2026, aim to enhance the resilience of banks and pre-empt systemic liquidity shocks. These  include, inter-alia ,  higher  run-off  factors  for  deposits  enabled  with  internet  and  mobile banking, reclassification of run-off rates for certain wholesale funding categories, and application of haircuts on Government securities held as High-Quality Liquid Assets (HQLA), in alignment with the LAF and MSF frameworks.

Various  regulatory  frameworks  put  in  place  by  the  RBI  from  time  to  time  aim  to  promote responsible lending and borrower protection, including in respect of small-ticket unsecured loans accessed by vulnerable segments. These include the RBI (Regulatory Framework for Microfinance Loans) Directions, 2022; the Master Direction - Reserve Bank of India (Non-Banking Financial Company - Scale Based Regulation) Directions, 2023 dated 19.10.2023; and the guidelines on fair practices  code for lenders under the Master Circular on Loans and Advances - Statutory and Other Restrictions dated 01.07.2015. These frameworks, inter-alia , collectively mandate fair pricing, provision  of  a  standardised  Key  Facts  Statement  (KFS),  and  implementation  of  responsible recovery practices.

With  a  view  to  strengthening  and  institutionalising  the  mechanism  for  maintaining  financial stability,  enhancing inter-regulatory coordination, and promoting financial sector development, regulatory coordination is strengthened through institutional mechanisms such as the Financial Stability and Development  Council (FSDC). Further, RBI monitors emerging financial vulnerabilities through its macroprudential surveillance framework.

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