On November 17, Axis Bank experienced a dip of over 3% in its shares, responding to the Reserve Bank of India’s (RBI) recent tightening of norms for personal loans and credit cards.
The regulatory move aims to curb the unrestrained expansion of these segments, with the central bank increasing credit risk weights on unsecured consumer loans, consequently elevating the capital requirements for such borrowings.
As of 1:22 pm, Axis Bank shares were trading 3.16% lower at ₹993.90 on the National Stock Exchange (NSE). Despite a 6% rally in 2023, the stock’s performance falls short of the benchmark Nifty 50, which has witnessed an approximately 8.5% rise during the same period.
Analysts predict that the heightened risk associated with unsecured credit could adversely impact the Capital Adequacy Ratios (CARs) of banks. CLSA and Citi have indicated a potential impact of up to 230 basis points (bps) on the Capital Adequacy Ratio, providing insights into a bank’s ability to withstand financial challenges and cover potential losses.