RBI's Proposed Risk Weight Changes to Benefit

SBICARD

, But Bad Debt Remains Critical

The Reserve Bank of India (RBI) has proposed revised risk-weight-based capital adequacy norms that are expected to reduce capital requirements for all credit card issuers, including

. → The new rules propose lowering the risk weight on outstanding dues from "transactors" (users who fully pay their dues on time) to 75%, down from the uniform 125% applied currently. Dues from "revolvers" (users who carry a balance and pay interest) would retain the 125% risk weight. → For SBI Cards, where transactors account for 40% of outstanding dues, this change would decrease the blended risk weight from 125% to 105%. → This reduction effectively lowers the minimum capital requirement for the company from ₹18.75 to ₹15.75 for every ₹100 outstanding, potentially encouraging issuers to focus on high-quality customers. → Despite the favorable regulatory tailwind, the company's financial performance has been challenged by a rising bad debt problem. → SBI Cards' gross credit cost (as a percentage of loans) has steadily risen sequentially from 6.7% in Q2FY24 to 9.6% in Q1FY26, indicating that cardholders are increasingly choosing to default rather than revolve their dues. → The company is taking preventive measures like capping credit limits for existing customers and ensuring the high quality of future applicants to manage delinquencies. → While the RBI's change is positive, capital adequacy was not a constraint for SBI Cards, whose ratio already stood at 23.2% (above the 15% minimum requirement) as of Q1FY26. → Though SBI Cards has tailwinds from likely lower interest costs on borrowings and increased consumer spending following GST rate cuts, keeping bad debts in check remains the critical factor for its future profitability.