Following the Reserve Bank of India’s decision to mandate higher risk weighting norms, India’s largest lender State Bank of India is going to increase interest rates on unsecured loans such as personal loans. Yes, you heard it right, personal loans are going to be more costly after the banking regulator’s move to mandate higher risk weighting for those segments. Reportedly, this move of RBI will impact 2-3 basis points on the State Bank of India’s NIM (Net Interest Margin). The chairman of State Bank of India, Dinesh Khara also spoke up regarding the same on Wednesday, November 22, 2023. If you are also scrambling to the interest regarding the increasing interest rates on unsecured loans, this article is for you. Delve deep into it and unfold more information. Scroll down.
The chairman of SBI, the largest lender in the country, Dinesh Khara said on Wednesday, November 22, 2023, i.e. yesterday, that the decision to increase interest rates on unsecured loans such as personal loans will impact 2-3 bps on SBI’s net interest margin. The chairman of SBI said on the sidelines of a banking event held on November 22, “If my cost of funds are going up, I will certainly increase interest rates. We have to do the calculation,” Continue reading this article for more details.
SBI announced the increase of interest rates on personnel loans after the Reserve Bank of India raised risk weighting for such unsecured loans last week. Reportedly, the RBI increased rates from 100 percent to 125 percent, which means the risk weighting on bank loans to increased NBFCs has surged by 25% points. Kindly note that the new norms of RBI on risk weighting are applicable for both outstanding and new loans. For more details, kindly shift to the next section.
Dinesh Khara added, “The reflection of due diligence is the gross non-performing assets. We have gross NPAs of 0.7 percent, which is the total retail book, including the unsecured segment, reflective of our due diligence and control mechanisms. “There will be an impact on NIMs by 2-3 basis points in the next quarter.” The CEO and MD of RBL bank R Subramaniakumar said the new norms would impact the credit card business while the lender was properly capitalized. He said, “RBL Bank’s Common Equity Tier-1 is at 15.15 percent and we are adequately capitalized. We gave the capital to risk-weighted asset ratio at 17.07 percent. It will have an impact on our credit card business. The impact on our overall business will be 60 bps.