SBI Card, the renowned player in the financial sector, witnessed a substantial setback, with its shares plummeting nearly 7% in Friday’s trading session. The decline, bringing the stock to a low of Rs 720.40 on the BSE, marks a concerning 17.35% decrease over the past six months.

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This downturn is attributed to the recent hike in risk weights on unsecured loans, a move by the Reserve Bank of India (RBI) that is anticipated to have a profound impact on capital ratios.

Analysts are particularly wary of the repercussions on SBI Card, among other non-banking financial companies (NBFCs). Kotak Institutional Equities expressed concerns over potential effects on earnings and capital adequacy ratios, emphasizing the need for vigilance.

Nomura India further highlighted the gravity of the situation, stating, “For NBFCs, we expect the impact on Tier 1 ratios to be in the range of 30-450 bps with the maximum impact on SBI Card, and could warrant a capital raise.” The report indicates that, following SBI Card, Bajaj Finance may experience a 250 bps impact on its Tier 1 ratio, despite having recently raised capital. Additionally, an increase in the cost of funds is anticipated, with SBI Card expected to bear the maximum brunt in this regard.

Motilal Oswal Securities concurred, estimating a 30-85 bps hit on capital ratios due to the rise in risk weight. Their calculations pointed to SBI Card being the most vulnerable among NBFCs, with a significant 416 basis points impact.

In light of these developments, various financial institutions are reevaluating their positions. Nuvama Institutional Equities identified SBI Cards, Axis Bank, state-owned banks, ABFRL, RBL, and Kotak as entities likely to experience growth constraints or capital challenges. In contrast, those least affected include IIB, LICHF, and City Union, attributed to their relatively immaterial exposures.

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As SBI Card grapples with the aftermath of the RBI’s move on unsecured loans, the financial landscape is witnessing a notable shift, prompting stakeholders to closely monitor the unfolding scenario.