RBI’s revised risk weight norms to impact capital adequacy by 4%, says SBI Card

20 Nov 2023 , 09:30 AM

The Reserve Bank of India’s (RBI) decision to enhance the risk weight for consumer credit is expected to diminish the company’s capital adequacy by roughly 4%, SBI Card stated in a statement on November 17.

On November 16, the RBI elevated the risk weight on commercial banks’ and NBFCs’ consumer loan exposure by 25% points.

According to SBI Card, this is a welcome move by the RBI to promote judicious expansion in unsecured lending.

We are currently well-capitalized and well above the regulatory guideline of 15%. Tier 2 capital will be supplemented if necessary. We don’t need to raise any capital. We are a thriving company with adequate profits to finance growth. An increase in risk weighting on NBFC lending by banks may result in an increase in borrowing costs for the industry, stated SBI Card.

The central bank increased the risk weight on commercial banks’ and NBFCs’ consumer loan exposure by 25% points. The risk weight of commercial banks and NBFCs’ consumer loans has been increased from 100% to 125%. This implies that banks and non-bank financial companies (NBFCs) must set aside more capital when making such loans.

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