In the morning trade on November 17, RBL Bank and SBI Card experienced significant declines of 9.5 percent and 6.7 percent, respectively, following the Reserve Bank of India’s (RBI) implementation of tighter norms for personal loans and credit cards.
A day prior, the RBI addressed concerns over the unchecked growth of unsecured loans by increasing the risk weight on consumer loans, thereby imposing higher capital requirements. This move is poised to elevate lending rates for unsecured customer loans, impacting companies like RBL Bank and SBI Card the most, particularly due to their high credit card share, as highlighted by Nuvama Institutional Equities.
SBI Card faces a substantial setback, with 100 percent of its Assets Under Management (AUM) composed of unsecured loans. For RBL Bank, unsecured loans constitute 31.8 percent of the total loans issued. The rise in risk weight on unsecured credit is anticipated to adversely affect RBL Bank’s Common Equity Tier-1 (CET-1) by 75 basis points (bps), according to Citi. Nuvama reported that SBI Cards’ capital adequacy ratio (CAR) for the quarter ending September stood at 23.3 percent, estimating a 4.2 percent decline post the RBI’s regulatory adjustment.
The RBI’s decision involves a 25 percentage point increase in the risk weight on consumer credit exposure for NBFCs and banks. Consumer credit, now assigned a risk weight of 125 percent, excludes housing loans, education loans, vehicle loans, and loans secured by gold and gold jewellery, as specified in the RBI circular.
As of 12:39 pm, RBL Bank shares were trading 6.31 percent lower at ₹238.50, while SBI Cards witnessed a 5.59 percent decline, trading at ₹729.40.
