RBL Bank, SBI Card tank up to 10%, hit hardest by RBI's revised personal-loan norms

The consumer credit of commercial banks and NBFCs has a risk weight of 100 percent, which is now 125 percent.

RBL Bank and SBI Card, which crashed 9.5 percent and 6.7 percent in the morning trade on November 17, were the hardest hit among the banking and NBFC names after the Reserve Bank of India (RBI) tightened the norms for personal loans and credit cards.

A day earlier, the central bank increased the risk weight on consumer loans as the unbridled growth of these unsecured loans has been causing a concern.

The move, in the form of higher capital requirements, could raise lending rates for unsecured customer loans. RBL Bank and SBI Card would bear the heaviest impact on the high credit care share, as the move takes away the companies’ growth multiple, Nuvama Institutional Equities said.

SBI Card would be one of the hardest hit financial counters, as unsecured loans make up 100 percent of the company’s AUM. These loans make up 31.8 percent of the total loans issued by RBL Bank.

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Citi said unsecured credit risk weight increase adversely impacts RBL Bank's CET-1 (common equity tier) by 75 basis points (bps). Nuvama noted that SBI Cards' existing capital adequacy ratio for the quarter ended September was 23.3 percent. The CAR is estimated to have fallen 4.2 percent following the RBI move.

The RBI has increased the risk weight on the consumer credit exposure of NBFCs and banks by 25 percentage poins. Consumer credit attracted a risk weight of 100 percent, which has been revised to 125 percent.

The increase in the risk weights of consumer credit exposure of commercial banks (outstanding as well as new), includes personal loans but excludes housing loans, education loans, vehicle loans and loans secured by gold and gold jewellery, the RBI circular said.

Also Read | RBI increases risk weight by 25% on consumer credit exposure of banks, NBFCs

For the NBFCs, the increase in risk weight is extended to retail loans, excluding housing loans, educational loans, vehicle loans, loans against gold jewellery and microfinance/SHG loans.

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