Risk weights on AAA NBFC loans doubles to 45%
non-banking finance companies (NBFCs), lower-rated lenders will likely fare worse since banks might still find it remunerative to lend to bigger non-bank borrowers with relatively lower risk profiles.
Tighter Reserve Bank of India norms mean that the bank risk weights on loans for AAA NBFCs have now more than doubled to 45% from 20% earlier, while those for AA-rated NBFCs have increased to 55% from 30% and for A- rated NBFCs to 75% from 50% earlier. Higher risk weights require banks to set aside more capital to provide cover against such loans.
To be sure, more than 80% of the bank loans of more than Rs 14.2 lakh crore are to NBFCs. Analysts said banks may have to increase interest rates on these loans to make lending viable.
Of the 350-odd rated NBFCs, less than 50 are rated AA and above. So, the other 300 may feel the impact more acutely.
«Banks may either have to raise rates by 15 to 20 basis points or slow lending to these segments to conserve capital. AAA-rated NBFCs for whom the increase in risk weighting is the highest can absorb these higher rates or even look at other options like capital markets or pass-through certificates,» said Karthik Srinivasan, group head financial sector ratings, ICRA.
One basis point is 0.01 percentage point.
US-based brokerage Jefferies said banks will see a 50 to 60-basis-point impact on Tier I capital adequacy due to rise in risk weights.
«While most private banks are well capitalised, this may force some banks (especially for PSBs like SBI & PNB) to advance the capital raising cycle by a year or so.
