Shares of Bajaj Finance, one of India’s largest non-banking financial companies (NBFCs), fell sharply this week after its September-quarter results revealed slower loan growth and rising borrowing costs, sparking investor concerns over the broader credit market’s momentum.
The company’s Q2 earnings — while profitable — reflected a tightening liquidity environment and pressure on margins, both key indicators of how India’s retail credit cycle may be entering a more cautious phase.
Bajaj Finance’s Q2 Snapshot
According to exchange filings, Bajaj Finance’s consolidated net profit rose 18% year-on-year to ₹3,720 crore, but that figure fell short of market expectations due to higher cost of funds and slower growth in new loans booked.
| Metric (Q2 FY26) | Result | YoY Change |
|---|---|---|
| Net Profit | ₹3,720 crore | +18% |
| Net Interest Income (NII) | ₹8,240 crore | +14% |
| Loan Book | ₹3.29 lakh crore | +21% |
| GNPA (Gross NPA) | 0.91% | +10 bps |
| Cost of Borrowing | 8.42% | +60 bps |
Despite maintaining asset quality, rising funding costs and slower credit disbursements in consumer and SME segments triggered investor concerns.
“Bajaj Finance remains fundamentally strong, but margin compression is now visible across the NBFC space,” said a market strategist at a Mumbai-based brokerage.
Shares closed nearly 4.5% lower on Tuesday, dragging the Nifty Financial Services Index by over 1.2%.
The Broader Message: Credit Growth Is Cooling
The company’s cautious commentary highlights a shift in India’s credit market after two years of aggressive post-pandemic expansion.
High borrowing rates, tighter liquidity, and early signs of urban consumption fatigue are weighing on new loan demand.
Key signals from Bajaj Finance’s results:
Retail borrowers are turning cautious in personal and consumer durable loans.
Delinquencies have inched up slightly in unsecured categories.
Competition from fintech lenders and public-sector banks is eroding margins.
Funding costs are rising faster than lending rates, squeezing spreads.
“The credit cycle is entering a phase of normalization. The risk-reward equation for NBFCs is changing,” said a banking analyst at Kotak Institutional Equities.
What It Means for India’s Credit Market
The correction in Bajaj Finance’s stock is not just about one company — it’s a signal of shifting dynamics in India’s broader credit ecosystem.
Three structural trends stand out:
Interest Rates Plateauing, Not Falling Yet:
Despite inflation easing, the RBI has maintained a “long pause” stance, keeping repo rates steady at 6.5%. This means credit remains expensive, especially for NBFCs dependent on market borrowings.
Rise in Credit Rationalization:
Lenders are becoming more selective. High-risk personal and small-ticket consumer loans are being re-evaluated to manage default risk.
Liquidity Tightness:
With large government bond issuances and festival-related credit flows, short-term liquidity remains under pressure, keeping funding costs elevated.
Investor Outlook: Short-Term Pain, Long-Term Resilience
Analysts say the current correction may be short-term, as Bajaj Finance continues to maintain strong asset quality, diversified portfolios, and a leading position in digital lending.
However, investors are likely to stay cautious until the company — and the broader NBFC sector — demonstrates stability in funding costs and loan demand.
“NBFC valuations had priced in perfect growth. Even a slight slowdown is triggering sharp reactions,” said a senior fund manager at a domestic mutual fund.
The Bajaj Finance decline may serve as a sentiment gauge for other retail lenders and fintechs, especially those dependent on high-cost borrowing.
Frequently Asked Questions (FAQ)
Q1: Why did Bajaj Finance shares fall?
Due to slower loan growth, higher borrowing costs, and cautious management commentary despite solid profits.
Q2: Does this signal a slowdown in India’s credit market?
Yes, it indicates early signs of credit normalization after a strong two-year expansion cycle.
Q3: Are NBFCs facing pressure from higher rates?
Yes, funding costs for NBFCs have risen by 50–80 bps over the last two quarters.
Q4: What sectors remain resilient?
Housing finance, gold loans, and large corporate lending continue to see stable demand.
Q5: Is this a buying opportunity for investors?
Analysts suggest accumulating on dips, focusing on NBFCs with strong capital adequacy and diversified portfolios.
Published on : 11th November
Published by : SMITA
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Source credit : Written by NDTV Profit Business Desk — with inputs from NSE filings, brokerage reports, and RBI market data.