RBI's New Guidelines To Have Capital Impact Of 55 Basis Points, Says SBI Chairperson
The norms have to be seen in the context of the regulator's concerns over the growth of unsecured loan book, says Dinesh Khara.
State Bank of India expects an overall impact of 55 basis points due to the central bank's new guidelines of increased credit risk weights on unsecured consumer loans, according to Chairperson Dinesh Khara.
The Reserve Bank of India's recent guidelines have come in response to high growth in the unsecured loans segment. Among several guidelines, the circular mentioned that consumer loans for banks and non-banking financial companies—barring home loans, education loans, vehicle loans, microfinance and gold loans—will attract a credit risk weight of 125% as compared with the previous 100%.
Based on its calculations, the bank would require an additional capital allocation of 130 bps, Khara told BQ Prime in a conversation.
"Even if we look at loans to (the) NBFCs, there will be another 25 bps that is expected," he said. "If we look at our half-year profit that we have earned till now, it would have added to our capital adequacy ratio by 109 basis points."
Overall, the lender doesn't envisage any challenge on account of these norms, Khara said. "We have sufficient growth capital, and we will be in a position to grow well."
The RBI's guidelines have to be seen in the context of concerns being expressed by the regulator in terms of growth of unsecured loan book. A lot of it is coming from fintech lending and 'buy now, pay later' kind of things, according to Khara.
Khara said the impact on borrowing costs for the NBFCs would depend on the blend of resources that they have.
"If they are dependent upon corporate bonds, perhaps, it will help them in reducing their cost," he said. "There will be (an) impact but how much... will depend."
The regulator also requires banks and NBFCs to define their exposure limits for unsecured loans. These limits will not only be at the segment level but even at the sub-segment level.
"We have been having internal exposure limits and sector limits... It is a guiding principle and already in place," Khara said.
Since frontline NBFCs and fintech lenders are expected to be the most impacted by these guidelines, Khara said one needs to wait and watch to understand how it will play out. "The normal expectation is that the cost for them will go up and it will have an impact on lending."