Will new capital rule aid SBI Cards?

SBI Cards and Payment Services is seen as a potential beneficiary of the Reserve Bank of India's (RBI) revised risk weight-based capital adequacy norms.

- Manish Joshi

SBI Cards and Payment Services is seen as a potential beneficiary of the Reserve Bank of India's (RBI) revised risk weight-based capital adequacy norms. A draft circular in this regard was released on Tuesday. In reaction, SBI Cards rose intraday on Wednesday. The proposed rules aim to reduce capital requirements for all credit card issuers.

Currently, credit card outstanding dues worth ₹100 are treated as ₹125 by applying a uniform risk weight of 125%. Then, the Capital to Risk-Weighted Assets Ratio (CRAR) rate of 15% is applied to ₹125 to arrive at a capital requirement of ₹18.75. There is no bifurcation of ₹100 into dues from transactors and revolvers. Transactors are credit card users who use the card for transactions and pay their dues by the due date. Revolvers, on the other hand, try to pay only a partial amount or a minimum amount due and are willing to pay interest and late payment charges on the remaining dues.