Summary
On November 16, 2023, RBI, through its notification ‘Regulatory measures towards consumer credit and bank credit to NBFCs’ announced the increase in Risk Weights assigned to consumer credit (excluding specific asset classes), credit card receivables and NBFCs exposures of the banks. This will have an impact on the capital adequacy of the entire banking sector.
CareEdge Ratings estimates that the impact of the regulations on the overall capital adequacy of the banking sector is likely to be moderate in the range of 30-70 bps for the public sector banks and 30-100 bps for private sector banks given the relatively higher exposure to unsecured personal loans (please refer to Strong Signal by Regulator to Control Unsecured Personal Loans).
This is in addition to the additional capital requirements for the banks under the proposed change from accounting for losses under IRAC norms to the ECL method (please refer to Proposed ECL Framework Likely to Have Moderate Impact on Banks).
