Lenders take heat as RBI cracks whip
Bank of India, Axis Bank, ICICI Bank and Bajaj Finance Ltd. The Bank Nifty fell 1.3%, the most in over two weeks, while the Finnifty, which comprises NBFCs and insurers, tumbled 0.9%. The Nifty PSU Bank index comprising SBI, Indian Bank, Bank of India, Punjab National Bank, Bank of Baroda and Canara Bank fell 2.39%, also the most in two weeks.
Foreign brokerage CLSA said it estimates a direct impact of 40-80 basis points (bps) reduction in tier-I capital for banks and 230-415 bps reduction for Bajaj Finance and SBI Cards and Payment Services. However, banks are still likely well-capitalized and should not need to raise additional capital, it said. “The other direct impact would be an increase in the cost of borrowing for NBFCs (which is hard to quantify).
We expect the indirect impact to be a moderation in unsecured loan growth for banks over the quarters to come. It could also impact the growth rates of fintech intermediaries like Paytm, although we do not think the impact would be large," a CLSA report said. A Macquarie Capital Securities report said bank loan growth could decline by about 200 bps because of the new rules.
RBL Bank, SBI Cards, and Aditya Birla Capital, which are not part of the Nifty, plunged 5-8% as bears topped up sell positions. Cholamandalam Finance fell 3.5%, while Shriram Finance shed 2.34%. Stocks such as RBL Bank, and SBI Cards could face continued pressure with their open interest or outstanding positions on their futures contracts rising.
A rise in open interest accompanied by a fall in prices signals bearish sentiment. Top brokerages believe NBFCs will be more impacted by the latest measures than banks which are well-capitalized. While calling it a “positive move" to ensure prudent growth in
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