State Bank of India's (SBI) Chairman, Dinesh Khara, stated that the net interest margin (NIM) of the bank is anticipated to witness a maximum moderation of 2-3 basis points in the third quarter of the fiscal year 2023-24. This adjustment is attributed to the Reserve Bank of India's (RBI) circular, which increased the risk weights for consumer consumption loans.
The risk weight for various lending categories, including consumer credit, NBFCs' consumer loans, and credit card receivables, was raised by the RBI. Khara mentioned that the rise in risk weights is a response to the surge in Buy Now Pay Later (BNPL) products, leading to over 30 per cent year-on-year growth in the unsecured personal loans segment.
SBI's NIM for the period of July to September stood at 3.29 per cent, showing a slight decrease compared to the previous quarter and the same period a year ago. Khara emphasised that SBI will maintain its existing loan growth strategies, but there may be a moderation in personal loans. If the cost of funds increases, interest rates on segments with elevated risk weights might be adjusted accordingly. SBI's retail personal loans amounted to Rs 12.43 trillion as of 30 September, reflecting a 16 per cent year-on-year increase.
Kotak Mahindra Bank's Whole Time Director, KVS Manian, echoed similar sentiments, anticipating a moderation in NIM without specifying the extent of the margin impact. Manian suggested that interest rates on unsecured credit might rise by up to 25 basis points, and the impact on credit demand will need to be monitored.
He noted that Kotak Bank's capital adequacy ratio exceeds 21 per cent, eliminating the need for additional capital raising. RBL Bank's MD and CEO, R. Subramaniakumar, projected a 1-2 basis points impact on the bank's NIM in Q3 due to the RBI's circular, and the capital adequacy ratio (CRAR) is expected to moderate by 60 basis points.