State Bank of India (SBI) shares were in focus on Thursday after the nation’s largest lender revealed plans to raise interest rates on personal loans. This decision follows the Reserve Bank of India’s (RBI) recent mandate to increase risk weighting for unsecured loans.
What Happened? SBI Chairman Dinesh Khara, speaking at a banking event, mentioned that this change will likely impact SBI’s net interest margin (NIM) by 2-3 basis points.
The RBI’s move last week raised the risk weighting for such loans from 100% to 125%. This increase also applies to bank loans to higher Non-Banking Financial Companies (NBFCs) by 25 percentage points. These new norms affect both new and existing loans.
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Khara emphasized that SBI’s low gross non-performing assets (NPAs) at 0.7% of the total retail book, including the unsecured segment, reflect the bank’s effective due diligence and control mechanisms. He anticipates a 2-3 basis point impact on SBI’s NIMs in the next quarter. SBI’s domestic NIM dropped to 3.43% in Q2FY24 from 3.55% in Q2FY23 and decreased sequentially from 3.47% in Q1FY24.
Pre-emptive measures: RBI Governor Shaktikanta Das explained that these measures aim for sustainability and are of a pre-emptive nature. However, he clarified that sectors driving major growth, such as housing, vehicles, and MSMEs (micro, small, and medium enterprises), are exempt from these higher-risk weightings. He also encouraged banks, NBFCs, and other financial entities to continue stress-testing their books.
Price Action: State Bank of India shares were trading 0.35% higher at ₹560.90 on Thursday morning.
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