RBI monetary policy was held in February. RBI Governor Shaktikanta Das lead Monetary Policy Committee (MPC) has kept repo rates unchanged at 6.5 percent to keep inflation under control to support the healthy growth of the Indian economy. In February, the Reserve Bank of India (RBI) suggested transparency rules for the additional charges charged by Banks and NBFCs on retail loans and MSME loan borrowers taking a loan. Additional charges will be charged, including processing fees and documentation charges, which are excluded while calculating the basic interest rates for retail, MSME loan borrowers.
RBI’s stance on making a transparent and customer-biased financial ecosystem is to mandate the provision of the Key Fact Statement for all retail loan borrowers and MSME loans. Banks should provide a clear, concise, one-page key fact statement/fact sheet to all individual borrowers at every stage of the loan processing as well as in case of any change in any terms and conditions.
Due to this stance, banks need verified documents while lending to retailers and MSMEs, which may lead to fewer sales of Loans. It will impact the Financing Profit for the upcoming Quarter but afterwards, Banks and NBFCs may start performing well to generate positive cash flow.
This quarter we might see some profit booking despite these changes in the finance rules set by RBI.
The Financial Services sector includes companies that provide Financial Services including banks, financial institutions, housing finance, insurance companies and other financial services companies. The Financial Services sector owns almost 33% of weightage in Nifty 50.
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1. HDFC Bank Ltd
HDFC Bank Limited is a publicly limited company engaged in retail banking and financial services. HDFC Bank has 29.75% weightage in the financial sector.
2. ICICI Bank Ltd
ICICI Bank Limited is India’s Largest private sector Bank which offers financial products and services to the retail, SME and corporate sectors. ICICI Bank owns 21.67% weightage in the financial sector.
3. Kotak Mahindra Bank Ltd
Kotak Mahindra Bank provides financial and banking services to the retail, commercial and corporate sectors. Kotak Group owns this bank, which also manages IPO-related processes, investment banking, stock broking and advisory services, vehicle financing, asset management, and insurance products. Kotak Mahindra Bank has an 8.07% weightage in the financial services sector.
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4. Bajaj Finance Ltd
Bajaj Finance is one of the largest lending NBFC(Non-Banking Financial Companies) in India. BFL also accepts deposits from the public and corporations. It loans electronics products, digital products, furniture and vehicles (two- three-wheelers). Bajaj Finance has a 5.74% weightage in the financial services sector.
5. Shriram Finance Ltd
Shriram Finance is in the business of financing, passenger vehicles, commercial vehicles, construction equipment, farm equipment, MSMEs, two-wheelers, gold and personal loans etc. Shriram Finance has a 2.06 % weightage in the financial services sector.
6. Cholamandalam Investment & Finance Company Ltd
CholaFin is the NBFC which is in the business of providing loans against properties, unsecured loans, vehicle financing, home loans, and SME loans. The company also provides services like wealth management, mutual fund distribution and stock broking.
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Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.