Context:
- The Reserve Bank of India (RBI) has proposed revised risk weight norms for credit card issuers.
- Current framework:
- All credit card dues (₹100) attract a uniform risk weight of 125%, leading to a capital requirement of ₹18.75 (CRAR of 15% applied to ₹125).
- No distinction between transactors (who pay in full on time) and revolvers (who carry forward balances and pay interest).
Proposed Changes:
- Transactor dues risk weight: Reduced to 75% as they pose lower credit risk.
- Revolver dues risk weight: Remains 125%.
- Definition of transactors: Customers who fully paid their dues by the due date in the last 12 months.
- Impact on SBI Cards:
- Transactors account for 40% of outstanding dues (Q1FY26).
- Blended risk weight reduces from 125% → 105% (75% on ₹40 + 125% on ₹60).
- Minimum capital requirement decreases from ₹18.75 → ₹15.75, giving more capital flexibility.
- Strategic implication: Encourages focus on high-quality customers with clean credit histories.
Financial & Operational Considerations:
| Aspect | Details / Observations |
|---|---|
| Stock Performance | – Up 40% in 2025.- CAGR since IPO (₹755 in March 2020 → ₹921.75) remains below 5%. – Volatility driven partly by high bad debts. |
| Credit Costs | – Gross credit cost: 6.7% (Q2 FY24) → 9.6% (Q1 FY26), except Q4 FY25. – Net credit cost: 5.5% → 8.5% sequentially. – Recoveries from past dues remain weak. |
| Preventive Measures | – Capping credit limits for existing customers. – Ensuring high quality of new card applicants. – Goal: Reduce delinquencies amid elevated household debt and leverage. |
| Capital Adequacy | – CRAR: 20.6% (Q1 FY25) → 23.2% (Q1 FY26).- Well above RBI’s minimum requirement of 15%, indicating capital is not a growth constraint. |
