Bajaj Finance Share Price Takes a Hit, Dips Over 3% as RBI Imposes Restrictions on Lending Through Two Digital Products

Bajaj Finance Share Price Takes a Hit, Dips Over 3% as RBI Imposes Restrictions on Lending Through Two Digital Products

On November 16, 2023, Bajaj Finance witnessed a nearly 4% decline in its share price in response to the Reserve Bank of India's (RBI) directive, prohibiting the non-banking finance company (NBFC) from lending under its 'eCOM' and 'Insta EMI Card' products. The stock dipped by as much as 3.97%, reaching ₹6,937.15 on the BSE.

The RBI's order mandates an immediate halt to loan sanction and disbursal under these products due to concerns about the non-issuance of Key Fact Statements (KFS) and deficiencies in KFS for other digital loans sanctioned by Bajaj Finance. The regulatory measures are anticipated to remain in effect until the company rectifies the observed deficiencies to the satisfaction of the RBI.

Bajaj Finance, however, affirmed that there would be no significant financial impact due to the RBI's intervention. Analysts view the issue more as an operational breach than a major violation and foresee a resolution in the near term.

The impacted products, 'eCOM' and 'Insta EMI Card,' contribute approximately 5% to Bajaj Finance’s total client base. Despite the supervisory restrictions, the company remains optimistic, expressing its commitment to promptly reviewing and implementing corrective actions.

While CLSA projects a 6% impact on Bajaj Finance’s profits during the ban, the company maintains that the overall financial impact will be negligible. The ban directly affects the discontinuation of eCOM lending on e-commerce platforms, impacting existing EMI card customers for their online purchases.

Motilal Oswal Financial Services highlighted that the ban, occurring after the festive period, minimizes the immediate impact. The brokerage estimates potential losses in e-commerce loan volumes over the next 45-90 days, affecting Bajaj Finance's monthly run-rate.

Despite the near-term challenges, Motilal Oswal Financial Services maintains a positive long-term outlook on Bajaj Finance, emphasizing its belief in the company's ability to address regulatory concerns and regain momentum in the digital ecosystem.

As of 9:30 am on November 16, Bajaj Finance's share price was trading 2.00% lower at ₹7,079.45 on the BSE. The brokerage suggests viewing any significant correction in Bajaj Finance's stock price as an opportunity to accumulate shares.