Bajaj Finance Shares Rally 7% As RBI Lifts Restrictions After 6 Months; What Happens Now?

Bajaj Finance share price jumped over 7 per cent in early trade on Friday after the Reserve Bank of India (RBI) lifted restrictions on the company’s two products eCOM and online digital ‘Insta EMI Card’.

Analysts were expecting the regulatory ban on two of Bajaj Finance products to be lifted soon after the NBFC made required changes in response to the regulatory restriction and formally requested the RBI for review and removal of the restrictions.

“We wish to inform that the RBI, vide its letter dated 2 May 2024, based on the remedial actions taken by the Company, has conveyed its decision of lifting the said restrictions on eCOM and online digital ‘Insta EMI Card’, with immediate effect. The company would now resume sanction and disbursal of loans in the above two business segments including issuance of EMI cards,” Bajaj Finance said.

Bajaj Finance said it remains committed to ensure adherence and compliance of regulatory guidelines.

The NBFC had on November 15, 2023 informed stock exchanges about the RBI restriction on the sanction and disbursal of new loans under “eCOM” and online/digitally on ‘Insta EMI Card’.

The RBI action against Bajaj Finance came after the NBFC failed to abide by the central bank’s digital lending guidelines — particularly non-issuance of key fact statements to the borrowers under the two lending products.

Analysts believe though removal of these restrictions by the RBI is on expected lines, the relief within less than 6 months not only comes as a positive surprise but also endorses the company’s management’s ability to course-correct quickly when needed.

“The embargo on the two products had a significant impact on Bajaj Finance’s profitability, and its new loan book was lower by 0.8 mn in Q4 and by 1.2 mn in FY24. Lifting of this ban would result in higher customer acquisition, along with improved fee income,” said Avinash Singh, Senior Research Analyst at Emkay Global Financial Services.

The recent development in the beginning of FY25 itself is a positive start for Bajaj Finance for the fiscal, and is expected to boost investor confidence in processes, commitment of management in making things right, and company’s ability to adapt to the changing regulation & business environment, he added.

The early resolution of the restriction increases confidence on the FY25 outlook and raises hopes of approval by the RBI for renewal of Bajaj Finance co-branded credit card with RBL Bank in December 2024.

Emkay Global kept its FY25-27 estimates unchanged and reiterated its ‘Buy’ rating on Bajaj Finance stock. It has kept March-2025 Bajaj Finance share price target unchanged at Rs 9,000 apiece.

Nomura India noted that Bajaj Finance’s PBT was impacted by 4 per cent in Q4 due to regulatory action on its two products ‘eCOM’ and ‘lnsta EMI Card’.

Bajaj Finance has has guided for 26-28 per cent AUM growth in FY25. This is against 25-27 per cent long-term guidance. Nomura howver expects RoE (21-23 per cent) and PAT (23-24 per cent) growth to be lower than the guidance.

This, it said, would be driven by pressure on NIMs (down 30-40 bps during 4Q24 -2Q25) due to its pivot towards secured asset and rising cost of funds; and elevated credit cost of 1.75-1.85 per cent against 1.6 per cent in FY24.

Bajaj Q4 Earnings

Last week, Bajaj Finance reported consolidated net profit at Rs 3,825 crore for the fourth quarter of FY24, registering a growth of 21 per cent year-on-year (YoY). The company’s total income in Q4FY24 rose to Rs 14,932 crore from Rs 11,368 crore in the year-ago period.

Bajaj Finance’s net interest income (NII) increased 28 per cent during Q4 to Rs 8,013 crore.

At 9:20 am, Bajaj Finance shares were trading 6.69 per cent higher at Rs 7,341.00 apiece on the BSE.