The Reserve Bank of India’s crackdown on personal loan disbursements banks and non-banking financial companies will have a significant impact on the entire sector. Non-bank players will be the hardest hit, experiencing higher costs when borrowing from banks and bond markets and being forced to pass on those costs to borrowers.
Analysts believe that companies like Paytm and Bajaj Finance will be most affected the RBI’s tighter capital norms on unsecured loans. The capital norms will require companies to raise more capital ahead of schedule and make lending more expensive for non-banks, slowing down the rapid growth in their balance sheets.
Specifically, Bajaj Finance, Aditya Birla Finance, and IIFL have a relatively high proportion of unsecured loans in their portfolios, making them the most susceptible to the impact of the RBI’s tightening. SBI Cards may also see a significant reduction in their Tier 1 capital adequacy ratio.
In addition to non-bank financial companies, fintechs like Paytm will also face challenges, as they will find it difficult to raise funds and pass on higher cost loans to consumers. The regulatory action comes at a time when credit costs in these segments have started to increase.
The consequences of these changes may include higher funding costs and increased capital requirements, leading to a slower growth trajectory for lending partners like Paytm. It is predicted that slower disbursement growth could impact lending revenues and overall contributions, potentially affecting break-even timelines for companies like Paytm.
Overall, the RBI’s action is expected to have a significant impact on the lending environment, with non-bank lenders and fintechs likely facing the brunt of the new regulations.