Bajaj Finance and Bajaj Finserv start session on subdued note after RBI stops Bajaj firm from lending via two schemes

The RBI has stopped Bajaj FInance from issuing loans through the ECOM and Insta EMI card schemes.

 

According to the RBI, the prescribed procedure related to 'Key Fact Statement' has not been followed under these two products.

 

The Bajaj group company says it has no material financial impact.

 

While, the RBI says the Bajaj Finance has broekn digital lending rules, it says the company can issue Insta EMI Card, and the restriction is only on giving digital loan through Insta EMI Card.

 

The RBI says that its stern action came after it got to know that Bajaj Finance didn't give its borrowers KFS (Key Fact Statements) of both the products.

 

The KFS include information like effective interest rate and recovery mechanism.

What can be the impact on Bajaj Finance?
These cards play a major role in the company's fee income.
The impact on fee income equal to 2 per cent of AUM.
The impact of ban on Insta EMI Card on income of Rs 65 crore/quarter
There will be a 1.5 per cent impact on PBT due to the ban on Insta EMI Card
If the ban continues, as high as 5-6 per cent impact on the company's profits is possible. Along with that, the company may find it tough to add new customers.

Facts 

Out of total 41.9 million EMI cards, 10 per cent cards were issued through digital medium.

Three lakh EMI cards were added in Q2

The company added 3.58 million new customers in Q2

Eight per cent of the total customers of the company were from EMI cards

Only 5 per cent of the company's total client base are EMI card customers.

18 to 19 per cent of the total new customers in 1HFY24 were through digital EMI cards

How long the ban can continue?

It took the RBI more than a year to lift ban from HDFC Bank

while, in case of MMFS, the RBI took a quarter to lift the ban

What brokerage says

The situation may improve in 1 to 2 quarters

This is more of an operational problem than a violation of RBI guidelines

There will be no major impact on digital EMI card payments.

There will be no impact on customer acquisition

The matter may improve with technical upgrade

The company may face problems on cross selling