BackRBI bar on two Bajaj Finance products may affect retailers
RBI has barred Bajaj Finance from lending under its two products—eCom and Insta EMI Card—citing non-compliance with digital lending guidelines
PremiumNEW DELHI : Retailers across the board may suffer after the Reserve Bank of India barred the largest consumer goods financier Bajaj Finance from disbursing loans under two products.
On Wednesday, RBI barred Bajaj Finance from lending under its two products—eCom and Insta EMI Card—citing non-compliance with digital lending guidelines. Several retailers that Mint spoke with said this move will significantly impact retailers—both online and offline.
Online marketplaces such as Amazon and MakeMyTrip have already stopped offering Bajaj Finance’s EMI option.
“Following instructions from Bajaj Finance Limited, Bajaj Finserv EMI card (BFL) will not be available on Amazon from 16th November 2023. BFL should be back soon, please keep checking Amazon for the latest status," read a note on the e-commerce website.
Lending platforms account for a significant share of sales for large retailers, especially for big-ticket purchases such as mobile phones and furniture.
Over the last six to eight months, the popularity of Bajaj Finserv Insta EMI Card had gone up as it offered customers a flexible repayment tenure and no-cost EMI options, said retailers. “In times when high inflation is eating into household budgets, more consumers have come to use and avail of the benefits of this lending product," said Anirban Chakraborti, who heads omni-channel business at mobile phone seller Sangeetha Mobiles.
Financing products account for nearly 50% of sales for mobile phone retailers. Bajaj Finance is the largest such non-banking finance company.
Retailers typically use the financing product to attract new customers, Chakraborthy said. “This ban will have a significant impact for us...The ban will take away a large chunk of online customers for us," he said.
For Sangeetha, Bajaj’s lending products account for 20-30% of e-commerce sales.
The move is sentimentally negative, said another top executive at a large electronics retail chain. “While it may not impact business on ground immediately as consumers may use other financing products, it could impact sentiment given how large Bajaj financing is in our sector," said Nilesh Gupta, director at electronics retailer Vijay Sales.
Nearly 40-45% of sales across electronics chains happen via Bajaj’s financing products, according to estimates by industry experts.
Flipkart declined to comment on the issue.
Meanwhile, furniture retailer Pepperfry said it facilitates EMI-based payments through a wide range of banks and instruments. “Importantly, our commitment remains steadfast despite the recent RBI directive, ensuring continued reliability in our services," the retailer said.
Bajaj Finance has 42 million EMI cards currently in force, according to its investor presentation for the quarter-ended September, higher by 22% year-on-year. In the second quarter, it acquired over 4.2 million EMI cards through the digital channel.
It financed over 2.82 million transactions in FY23 using the EMI card, representing a growth of 11% versus the previous year
Foreign brokerage firm CLSA estimate that the ban will impact Bajaj Finance’s profit by 6%.
“Let us say both add to 1 million loans per quarter. This would amount to 20-25% of consumer durable (CD) loans disbursed. CD loans comprise c.10% of total loans and c.15% of total profits in our view. If 20-25% of the incremental CD loans are impacted by the ban, it would hit profits by 4-5%. Hence, all in, as long as the ban stays, profits would be impacted by 6%," said CLSA in its note.
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