SBI Card shares in focus as NBFC gives update on likely impact of increase in risk weights

Shares of SBI Cards and Payment Services Ltd (SBI Card) will be in focus on Monday morning after the NBFC welcomed the RBI's regulatory measures on consumer credit and bank credit to NBFCs, saying it does not expect any significant impact on its cost of funds for the ongoing financial year.

In a filing to stock exchanges post market hours of Friday, SBI Card said the move would "ensure prudent growth in unsecured lending" but suggested some impact on the capital adequacy ratios for banks and NBFCs.

"For SBI Card, this impact will reduce capital adequacy by around 4 per cent," it said adding that it is well-capitalised.

The RBI's move sent shares of SBI Card falling 5 per cent on Friday. Various brokerages expected SBI Card to be the most impacted NBFC.  Jefferies said SBI Card faces highest drag on Tier I CAR and highest dependence on bank funding. "SBI Cards looks to be the one with the maximum negative impact," Nomura India said in a note.

Motilal Oswal Securities suggested a 416 basis points impact on SBI Card's capital ratio due to the increase in risk weight.

SBI Card said the rise in risk weight on NBFC lending by banks could increase in cost of borrowings for the industry.

"If required, we will augment tier 2 capital. There is no need for us to raise equity. We are a profitable company, and our profits are sufficient to fund growth," SBI Card informed stock exchanges.

SBI Card further suggested that it is a AAA-rated company and that it has enough sources and diversified lender base, to manage the impact.

"We do not foresee significant impact on our cost of funds during this financial year. It may increase marginally in absolute terms on an annualized basis. SBI Card remains focused and committed to sustainable and profitable growth. We would like to highlight that as a large and well capitalised NBFC, the new rules will in fact open opportunities for good quality customer acquisition," it said.

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