Bajaj Fin watchful on rural B2C credit

MUMBAI: Consumer financier Bajaj Finance on Monday said it continued to remain watchful of risk metrics in its rural b2c (business-to-consumer) segment and has calibrated the pace of growth in the business.

The non-banking financial company’s (NBFC) loan losses and provisions were ₹1,248 crore in the three months through December, up 48% from the same period last year. Bajaj Finance posted a net profit of ₹3,639 crore in Q3, up 22% year-on-year (y-o-y) but fell short of analyst expectations. Bloomberg estimates had pegged its Q3 profit at ₹3,750 crore.

“The loan losses were primarily on account of two portfolios of the company. For rural B2C business for the last two quarters have been elevated and they remained elevated even in Q3,” Rajeev Jain, managing director of Bajaj Finance told analysts.

“The AUM (assets under management) growth of that business continues to slow down as a result of risk actions. In the March quarter, it grew by 26%, and in the December quarter that portfolio has grown only by 10%. The second reason why credit costs were elevated in the quarter was Urban b2c business, due to lower collection efficiencies,” said Jain.

The company said in its presentation that December was a mixed quarter. While it was a good quarter on AUM, customer acquisition, portfolio metrics and operating efficiencies and capital position, dampener for the quarter were elevated loan losses and impact of regulatory action.

In November, RBI raised the risk weights assigned to unsecured consumer credit like personal loans and credit card dues. This came after months of monitoring the situation and cautioning banks against going all out in lending to these categories. Its capital adequacy ratio was at 23.87% as of 31 December 2023 and the lender said RBI’s risk weight increase had an impact of 290 basis points (bps) on its capital adequacy ratio.

Moreover, in November RBI directed the lender to stop sanction and disbursal of loans under its two lending products: eCOM and Insta EMI Card with immediate effect on account of certain deficiencies in implementation of the provisions of Digital lending guidelines.