Why Analysts Are Upbeat About Bajaj Finance Despite RBI's Ban On Two Lending Products

The share price of Bajaj Finance fell nearly 4% on Thursday, dropping to ₹6,937.15 per share on the BSE. This decline occurred following the Reserve Bank of India’s (RBI) directive to the company.

What Happened? The RBI ordered Bajaj Finance to halt lending under its ‘eCOM’ and ‘Insta EMI Card’ products. The RBI issued this directive because Bajaj Finance did not comply with the issuance of Key Fact Statements (KFS) for these products and other digital loans.

In response, Bajaj Finance, in a regulatory filing, stated that they had been issuing KFS for loans under these products. However, they will now conduct a thorough review and implement corrective actions to address the RBI’s concerns.

The company assured that this action by the RBI would not significantly impact its financials. The restrictions will remain in place until Bajaj Finance rectifies the issues to the satisfaction of the RBI.

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What do analysts say? In a nutshell, the RBI’s recent decision to restrict Bajaj Finance’s ‘Insta EMI Card’ and ‘eCOM’ lending may cause short-term market fluctuations, but experts do not expect it to significantly alter the market landscape.

Analysts are viewing this more as a hiccup in operations than a major foul play. CLSA predicts a 6% dent in profits while the ban is active.

IIFL, on the other hand, warns that a prolonged ban could slow down new customer sign-ups, potentially nibbling away at profits. These digital EMI cards, which make up a significant 18-20% of new customer additions, also contribute about 2% to the company’s assets under management through fee income.

BofA Securities, however, downplays the impact, suggesting that customer acquisition won’t be majorly affected, although it might put a damper on cross-selling some digital loan products.

Price Action: Bajaj Finance shares recovered by 0.42% to ₹7,255.00 on Thursday shortly after market open on the back of a positive outlook from analysts.

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