SBI Card Provides Update On Impact Of Increased Risk Weights, Shares In Focus

In the wake of the RBI's regulatory measures on consumer credit and bank credit to NBFCs, SBI Cards and Payment Services (SBI Card) anticipates no significant impact on its cost of funds for the ongoing financial year. The company, in a filing to stock exchanges, welcomed the regulatory move, stating it would "ensure prudent growth in unsecured lending" while acknowledging potential impacts on capital adequacy ratios for banks and NBFCs. 

SBI Card expects around a 4 per cent reduction in capital adequacy due to the regulatory changes, emphasising its well-capitalised position. Despite the RBI's measures leading to a 5 per cent fall in SBI Card's shares, the company asserted its profitability and ability to fund growth without the need to raise equity. 

Various brokerages had earlier predicted SBI Card to be the most affected NBFC. Jefferies highlighted the company's high drag on Tier I CAR and dependence on bank funding, while Nomura India noted it faces the maximum negative impact. Motilal Oswal Securities estimated a 416 basis points impact on SBI Card's capital ratio due to the increased risk weight. 

SBI Card assured that, if necessary, it would augment tier 2 capital, emphasising its AAA-rated status and diversified lender base to manage the impact. The company does not foresee a significant impact on its cost of funds for the current financial year, and any increase is expected to be marginal on an annualised basis. SBI Card sees the new rules as an opportunity for quality customer acquisition.