With new regulations by RBI on the current account, CLSA believes that State Bank of India would be the key beneficiary along with other PSU banks, in respect to their size and capability.
With new regulations by the Reserve Bank of India (RBI) on the current account (CA), CLSA believes that State Bank of India (SBI) would be the key beneficiary along with other PSU banks, in respect to their size and capability.
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On August 6, RBI announced new CA rules and regulations, where companies are required to open CA or cash-credit/overdraft accounts only with banks who have lent substantial loans to them. The clear intention behind this rule is to prevent siphoning of funds by borrowers.
According to CLSA, the top-3 private banks would gain some CA business from foreign banks but would likely lose some MSME and small corporate CA business to PSUs. Smaller corporate exposure banks, like Kotak Mahindra Bank, would need to increase lending exposure in large consortiums or risk losing some CA business.
"Large PSU banks and the top three private banks would either already have or could get to the 10 percent exposure threshold suggested by the RBI. So for large banks, we do not see a significant change in CA and related business share among themselves but they could consolidate the share of smaller bank CA business," explained the brokerage.
SBI remains the key beneficiary of the new RBI-CA rule given its large corporate loan book, international presence and cash management offering, added CLSA.
Meanwhile, the report also noted that the smaller banks like IndusInd Bank and RBL Bank would lose CA business given their smaller balance sheets and their cost of funds would prevent them from extending large amounts of credit to large companies.