Nifty bank indices down after RBI raises weightage on unsecured loans

RBI's action to raise risk weights for unsecured loans dampened banking stocks caused a temporary disruption in the broader indices' resurgence

RBI's action to raise risk weights for unsecured loans dampened banking stocks caused a temporary disruption in the broader indices' resurgence
RBI's action to raise risk weights for unsecured loans dampened banking stocks caused a temporary disruption in the broader indices' resurgence

SBI, Bajaj Finance, HDFC Bank, Axis Bank, other financials fall after RBI tightens consumer loan norms

Nifty PSU Bank and Nifty Bank fueled pessimism in the market, which was down by 2.39 percent and 1.31 percent respectively.

RBI’s decision to place a higher risk weight on credit cards and unsecured loans would immediately raise banks/ NBFCs’ capital requirements, which will raise capital costs. Banks may readily pass on the higher cost to borrowers since there is a strong demand for credit in some categories, such as unsecured retail loans, says Vaibhav Vidwani, Research Analyst, Bonanza Portfolio.

As a result, borrowers’ cost of credit will slightly increase. The effect on financial institution profits will be insignificant.

SBI, the largest public sector bank, suffered the most as it has a large amount of retail exposure (14 percent of the book), whereas the majority of NBFC were down Friday, he said.

SBI, Axis Bank, ONGC, BPCL, and Bajaj Finance were among the top losers on the Nifty, while gainers were SBI Life Insurance, HDFC Life, Apollo Hospitals, Larsen & Toubro and Hero MotoCorp.

Nagaraj Shetti, Technical Research Analyst, HDFC Securities after showing weakness from the highs in the last session, Nifty shifted into a range-bound movement with weak bias on Friday and closed the day lower by 33 points. After opening on a negative note, the market attempted an upside recovery in the early part of the session. It later shifted into a range-bound movement for the better part and slipped again towards the end.

Vinod Nair, Head of Research at Geojit Financial Services said the RBI’s action to raise risk weights for unsecured loans dampened banking stocks and caused a temporary disruption in the broader indices’ resurgence.

[With Inputs from IANS]

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