SBI Chairman Dinesh Khara stated on Wednesday that the State Bank of India will witness “moderation” in its unsecured lending portfolio following the Reserve Bank of India’s decision to mandate higher risk weights on the consumer loan segment.
He further said that a 0.02-0.03 percent decline in net interest margins will be the result of higher risk weights during the December quarter. However, according to SBI Chairman Dinesh Khara, a clearer picture should show up in the upcoming quarter.
When questioned by reporters about the RBI’s tightening of rules, Khara responded, “Whatever we were doing, we will continue to do, but there will be a moderation,” outside of a FIBAC event here.
The national banks regulator had requested earlier this month that lenders exercise caution and raise risk weights on unsecured lending to both banks and non-banks.
Lenders have been asked by the RBI to set aside more money for each risky loan. With larger buffers to assist in the event of stress, the change will guarantee improved cushioning of these unsecured loans. However, the announcement will make credit card borrowing and personal loans more expensive.
Khara noted that as funding becomes more expensive, so too will the interest rates on these kinds of loans. Additionally, he stated that because of the new RBI regulations, the move will result in an increase in capital costs that the bank must pay.
There will be no changes from a diligence standpoint, he added later, emphasizing the already “robust” SBI norms. In reference to the portfolio of unsecured loans, he mentioned that the gross non-performing assets of SBI amount to 0.70%.
Khara had stated earlier in November that the bank’s unsecured loan portfolio is performing well, so it is not a cause for concern.
