New Delhi | Shares of bank and NBFC firms faced heavy selling pressure on Friday after the Reserve Bank tightened norms for unsecured personal loans.
State Bank of India shares fell 3.64 per cent, Axis Bank declined 3.03 per cent, Canara Bank went lower by 2.02 per cent, ICICI Bank slipped 1.45 per cent, and Federal Bank skidded 1.40 per cent on the BSE.
Also, Bank of Baroda dipped 0.91 per cent, Kotak Mahindra Bank (0.43 per cent), HDFC Bank (0.22 per cent) and IndusInd Bank (0.09 per cent).
The BSE Bankex index fell 1.48 per cent to 49,170.81.
Shares of RBL Bank tanked 7.82 per cent, and Punjab National Bank dropped 2.11 per cent.
Among non-banking financial companies, shares of SBI Cards and Payment Services tumbled 5.19 per cent, Ujjivan Financial Services fell 5 per cent, Arman Financial Services (3.17 per cent), IIFL Finance (3.08 per cent) and Bajaj Finance (1.99 per cent).
"The RBI's action to raise risk weights for unsecured loans dampened banking stocks and caused a temporary disruption in the broader indices' resurgence," said Vinod Nair, Head of Research at Geojit Financial Services.
The Reserve Bank on Thursday tightened norms for consumer credit as it asked banks and NBFCs to assign a higher risk weight for unsecured personal loans, a move aimed at making the lenders more cautious about such advances.
The risk weight on unsecured consumer loans has been raised by 25 percentage points.
The new regulations, however, will not be applicable to housing loans, education loans, vehicle loans and loans secured by gold and gold jewellery, the Reserve Bank said in a circular.
A higher risk weight means that lenders need to set aside more funds as a safety net for consumer loans, which could make such credit more expensive. In simple words, a higher risk weight restricts banks' lending capacity.
In the circular, the RBI said, "It has been decided to increase the risk weights in respect of consumer credit exposure of commercial banks (outstanding as well as new), including personal loans, but excluding housing loans, education loans, vehicle loans and loans secured by gold and gold jewellery, by 25 percentage points to 125 per cent".
A similar raise has been effected in the case of credit card receivables, as per the circular on 'Regulatory measures towards consumer credit and bank credit to NBFCs (non-banking financial companies)'.
The 30-share BSE Sensex declined 187.75 points or 0.28 per cent to settle at 65,794.73. The Nifty skidded 33.40 points or 0.17 per cent to 19,731.80