 "Dinesh Khara, SBI Chairman")
State Bank of India (SBI), the country’s largest lender, will increase interest rates on unsecured loans — personal loans — following the banking regulator’s move to mandate higher risk weighting for those segments.The increase in risk weighting for unsecured loans will have an impact of 2-3 basis points on SBI’s net interest margin (NIM), Chairman Dinesh Khara said on Wednesday.
“If my cost of funds are going up, I will certainly increase interest rates. We have to do the calculation,” the SBI chairman said on Wednesday on the sidelines on a banking event.
Last week the Reserve Bank of India increased risk weighting for such loans from 100 per cent to 125 per cent. Risk weighting on bank loans to higher NBFCs too has been increased by 25 percentage points.
The new norms are applicable to both new and outstanding loans.
“The reflection of due diligence is the gross non-performing assets. We have gross NPAs of 0.7 per cent, which is the total retail book, including the unsecured segment, reflective of our due diligence and control mechanisms,” Khara said.
“There will be an impact on NIMs by 2-3 basis points in the next quarter,” he added.
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SBI’s NIM for domestic operations lowered by 12 basis points to 3.43 per cent in Q2FY24 from 3.55 per cent in Q2FY23.
Sequentially, the NIM fell from 3.47 per cent in Q1FY24.
R Subramaniakumar, managing director and chief executive officer (CEO), RBL Bank, said while the lender was adequately capitalised, the new norms would be impacting the credit card business.
“RBL Bank’s CET1 [common equity tier-1] is at 15.15 per cent and we are adequately capitalised. We gave the capital to risk-weighted asset ratio at 17.07 per cent. It will have an impact on our credit card business. The impact on our overall business will be 60 bps,” Subramaniakumar said.
The RBL Bank CEO said despite the tighter norms the bank would be able to achieve the growth rate mentioned in the annual plan because the profits would aid in facilitating it.
“We have no plans of raising capital. The exposure to NBFCs, which will be impacted, is minimal,” he said.
Bankers said the signal from the regulator was to go slow on unsecured loans.
“The intention is to slow (and) make it more penal. It is too early to say the response from our end as we don’t have a large unsecured loan book,” said Hitendra Dave, CEO of HSBC India.
Earlier in the day, RBI Governor Shaktikanta Das said the recent measures were aimed at sustainability and were pre-emptive in nature.
At the same time, Das said the regulator had exempted sectors that were major growth drivers from higher risk weighting.
“We recently announced a few macro prudential measures in the overall interests of sustainability. These measures are pre-emptive in nature. They are calibrated and targeted,” Das said.
“It may be relevant to note that major growth drivers like loans for housing, vehicles, and MSMEs (micro, small, and medium enterprises) have been excluded from these measures,” Das added.
Das said banks, NBFCs and other financial entities must continue to do stress-testing of their books.
