Explained – How RBL Bank and SBI Cards benefit from the RBI draft circular for credit risk capital framework

Shares of SBI Cards & Payment Services Ltd. and RBL Bank Ltd. surged up to 5% on Wednesday, October 8 in response to the Reserve Bank of India’s draft guidelines for the credit risk capital framework, which were released on Tuesday evening.As per the draft norms, for personal loans and credit cards, the risk weight will continue with a 125% limit. However, for the “transactor” category of credit cards, the risk weight is proposed to be brought down to 100% from 125%.

A transactor credit card user is one who consistently pays their credit card balance in full by the due date of each month, thereby avoiding both interest charges and late fees. In contrast, a revolver is one who carries a balance and incurs interest.

40% of SBI Cards total receivables of ₹56,607 crore are “transactor” users.According to Macquarie, the move is positive for SBI Cards, as it will release 450 basis points worth of capital for the company.

Motilal Oswal also wrote in its note that the move is positive for credit card players, as most of them have a higher “transactor” base, which ranges between 55% to 65% of the overall receivables.

The move is also positive for RBL Bank as nearly 18% of its overall loan book is from the credit card segment, and out of its total assets under management (AUM) of ₹21,499 crore as of the June quarter, 30% is from “transactors.”

Shares of RBL Bank ended 4.9% higher at ₹287. The stock is still in the F&O ban, which means no new positions can be created on the stock. On the flip side, shares of SBI Cards ended marginally off the highs of the day, but with gains of 1.8% at ₹921.3.