- What Has RBI Proposed for NBFCs?
- Why Does This Matter More for Bajaj Finance?
- How Much of Bajaj Finance Could Be Exposed?
- Why Could the RBI Proposal Affect Bajaj Finance?
- Why Is RBI Looking at Revolving Credit?
- Does This Mean Bajaj Finance Loses 15% of Its Business?
- Bajaj Finance’s Core Business Remains Strong
- What Should Bajaj Finance Investors Watch Now?
- Author’s Take
Bajaj Finance shares came under pressure after the Reserve Bank of India proposed new rules restricting NBFCs from offering certain revolving credit facilities.
At first, this may look like another regulatory tightening for the entire NBFC industry. But the impact may not be equal across lenders.
The bigger concern for Bajaj Finance is that the RBI proposal could affect some of its flexi-loan products, where customers can repay borrowed money and then reuse the available credit limit.
According to IIFL estimates, revolving credit facilities could account for around 15% of Bajaj Finance’s assets under management (AUM). That makes Bajaj Finance relatively more exposed to the proposed rules than several other large NBFCs.
For investors, the important question is not whether Bajaj Finance will stop growing. It is whether the new rules could reduce the convenience, repeat borrowing and fee income generated by some of its lending products.
What Has RBI Proposed for NBFCs?
The RBI has released draft regulations proposing that NBFCs should primarily provide loans in the form of term loans, unless they are specifically authorised to issue credit cards.
A term loan has a fixed principal amount and follows a predetermined repayment structure.
More importantly, once a borrower repays part of the principal, that amount should not automatically become available for borrowing again.
This is different from a revolving credit facility.
- For example, suppose a customer receives a credit limit of ₹5 lakh.
- Under a revolving loan structure, the customer could borrow ₹3 lakh, repay ₹1 lakh and then borrow that ₹1 lakh again later because the available limit gets restored.
- Under the proposed term-loan structure, once the ₹1 lakh is repaid, it would not automatically become available again.
This small difference can significantly change how customers use loan products.
Why Does This Matter More for Bajaj Finance?
Bajaj Finance has built a large lending franchise across consumer loans, personal loans, business loans and other credit products.
One important part of this ecosystem is its Flexi Loan offering.
Flexi loans allow eligible borrowers to withdraw money from an approved limit depending on their requirements. Borrowers can make repayments and, depending on the structure, withdraw money again within the sanctioned limit. This makes the product more flexible than a traditional term loan.
A normal term loan relationship generally looks like this:
Loan sanctioned → amount disbursed → EMI repayment → loan closes
A revolving facility can instead look like this:
Credit limit sanctioned → borrow → repay → redraw → continue using the facility
For the customer, this provides convenience.For Bajaj Finance, it can create a longer lending relationship with the same customer. That is why the RBI proposal matters.
How Much of Bajaj Finance Could Be Exposed?
According to IIFL estimates, revolving credit facilities could represent around 15% of Bajaj Finance’s AUM.
The estimated exposure varies significantly across NBFCs.
| NBFC | Estimated revolving credit exposure |
| Bajaj Finance | Around 15% of AUM |
| Tata Capital | High single-digit to low double-digit percentage |
| Cholamandalam Finance | Less than 1% |
These are analyst estimates and not necessarily numbers disclosed directly by the companies. But they help explain why Bajaj Finance attracted greater investor attention after the RBI proposal.
The market is not treating this simply as an NBFC-wide problem. It is looking at which lenders depend more heavily on revolving credit products.
Why Could the RBI Proposal Affect Bajaj Finance?
The biggest risk is not that Bajaj Finance suddenly loses its existing loan book. Instead, the rules could change the economics of how some future loans are originated and used.
1. Loan Growth Could Face Some Pressure
One advantage of a revolving facility is that customers can repeatedly use an already sanctioned credit limit. Suppose a borrower gets a ₹5 lakh facility. The borrower may initially use only ₹2 lakh. After repaying part of the amount, they may borrow again when another financial requirement arises.
This allows the lender to generate repeat business from an existing approved customer. If the same customer instead needs a fresh term-loan arrangement every time additional money is required, borrowing becomes less convenient.
That additional friction could reduce how frequently customers borrow.
This matters for Bajaj Finance because consistently strong AUM growth has been one of the major reasons behind its premium valuation.
Bajaj Finance's AUM increased around 24% year-on-year to approximately ₹5.47 lakh crore in Q1 FY27.
Therefore, investors are assessing whether restrictions on revolving credit could make sustaining high loan growth slightly more difficult.
2. Fee Income Could Also Be Affected
There is another impact beyond loan growth. Bajaj Finance charges annual maintenance fees on certain Flexi Loan facilities. This means the economics of these products are not limited to interest income from the amount borrowed.
The facility itself can generate additional fee income because customers maintain access to a reusable borrowing limit.
If some of these products have to be redesigned as conventional term loans, part of this recurring fee opportunity could also change.
The eventual impact will depend on how Bajaj Finance restructures its products and what the final RBI regulations look like. Still, investors are considering both sides of the equation: Potentially lower repeat borrowing + potentially lower fee income
3. The Bigger Issue Is Customer Lifetime Value
This is probably the more important long-term angle. Bajaj Finance has already spent money and resources to acquire a customer, analyse their credit profile and build a lending relationship.
Once the customer is approved for a flexi facility, the company can potentially serve multiple borrowing requirements through the same relationship.
That improves the economics of customer acquisition.
Instead of acquiring a customer for one loan, Bajaj Finance may generate several borrowing transactions from the same customer over time.
Revolving credit therefore does something valuable for a lender. It increases the potential lifetime value of an existing customer.
If the RBI proposal makes repeated borrowing less seamless, Bajaj Finance may still retain the customer, but monetising that customer could become slightly less efficient.
This is why the proposal is more important than simply looking at the percentage of AUM affected.
Why Is RBI Looking at Revolving Credit?
One possible regulatory concern around revolving facilities is that their repayment behaviour can be more complicated than conventional term loans.
With a normal term loan, the structure is relatively straightforward. The borrower receives a fixed amount and follows a predetermined repayment schedule.
This makes it easier to track the outstanding principal, overdue amounts and repayment behaviour. A revolving facility is more dynamic because the customer may repeatedly borrow, repay and borrow again.
The RBI proposal appears to move NBFC lending towards more clearly defined term-loan structures, while revolving credit remains more closely associated with specifically authorised credit products such as credit cards.
Does This Mean Bajaj Finance Loses 15% of Its Business?
No. This distinction is important.
The IIFL estimate suggests around 15% of Bajaj Finance's AUM may be linked to revolving facilities, but that does not mean 15% of Bajaj Finance's loan book will disappear.
The underlying demand for credit remains. Customers will still require personal loans, consumer loans, working-capital finance and other forms of borrowing.
Bajaj Finance could redesign affected products so that borrowing is structured through separate term loans or other RBI-compliant formats.
Therefore, the real risk is more likely to be: Product redesign + lower convenience + some impact on repeat borrowing + possible pressure on fee income
rather than the complete loss of the affected loan portfolio.
Bajaj Finance’s Core Business Remains Strong
The timing of the RBI proposal is also interesting because Bajaj Finance recently reported a strong Q1 FY27 performance.
- Its AUM increased around 24% year-on-year to ₹5.47 lakh crore, while net interest income increased around 23%.
- Net profit increased around 27%.
- Asset quality also remained healthy, with gross NPA at around 0.96% and net NPA at around 0.39%.
So the fall in the stock was not driven by a sudden deterioration in Bajaj Finance's existing loan book. It was driven by concern about how regulation could change the future economics of part of its business. That is an important difference.
What Should Bajaj Finance Investors Watch Now?
The RBI regulations are currently proposals, so the final rules could still change.
The biggest thing investors should watch is how Bajaj Finance responds if the regulations are implemented in their current form.
The company may be able to convert existing flexi products into alternative term-loan structures without significantly affecting customer demand.
If that happens, the financial impact could remain manageable.
But if product restrictions materially reduce repeat borrowing, fee income or customer engagement, the impact becomes more important because Bajaj Finance trades at a premium partly due to expectations of consistently high growth and strong customer monetisation.
Author’s Take
The RBI proposal does not challenge Bajaj Finance’s credit quality or existing loan demand. The bigger risk is that it could reduce the efficiency of its lending model.
According to IIFL estimates, revolving facilities account for around 15% of Bajaj Finance’s AUM, making the company more exposed than several peers.
If customers can no longer repeatedly borrow against the same sanctioned limit, Bajaj Finance may see some pressure on repeat borrowing, fee income and customer lifetime value.
However, the underlying demand for credit does not disappear. Much will depend on how effectively Bajaj Finance redesigns these products within the new regulatory framework.
For investors, the key risk is therefore not the loss of the existing loan book, but whether regulation makes future growth and customer monetisation slightly less efficient.