The recent guidelines laid out by the Reserve Bank of India to check the spurt in unsecured lending and, in turn, rein in risk-weighted assets, are unlikely to have any significant impact on loan growth, according to State Bank of India Chairman Dinesh Kumar Khara.
On November 16, the RBI announced a 25 percentage point rise in the risk weight assigned to consumer credit exposure for commercial banks and NBFCs.
Khara, in an interaction with CNBC-TV18 on December 7, noted that the RBI's latest risk-weighted assets surge applies to only consumer loans in general, including house loans, education loans, vehicle loans, and loans secured against gold and gold jewelry. The SBI chief said that contrary to general perceptions, there is unlikely to be any slowdown in loan growth.
Also read | SBI's unsecured lending to see moderation after RBI's tightening: Chairman
The total share of loans impacted by the RBI's latest norms accounts for only Rs 15 trillion out of the Rs 151-trillion loan base of the banking sector, accounting for nearly 9.8-10 percent as of September 2023, he said.
Khara pointed out that the banking system has an excess capital to the tune of Rs 7 trillion. After careful evaluation, it has been learnt that the central bank's RWA increase will consume only Rs 84,000 crore of the total banking sector, which is a meagre 0.7 percent of the total capital.
Also read | MC Explains: RBI tightens consumer loan norms for banks and NBFCs
Loan growth outlook
Khara predicted that the third quarter of fiscal 2024 will see a comparatively decent growth in credit to the corporate, rural and SME sectors. In the retail space, home loans see decent growth, having registered a nearly 25 percent growth between April and October, according to him. It is, in turn, driving growth across all core sectors in the economy, he added.
For the fiscal 2023-24, Khara predicts an overall loan growth of about 16 to 18 percent. The SBI chief anticipates a similar growth pattern for fiscal 2024-25 as well, based on evaluation of early growth trends as of now.
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