Bajaj Finance Ltd has significantly curtailed its used car refinancing business due to elevated delinquencies, while continuing to expand in new car loans and secured lending. The move aligns with the company’s risk-first approach, ensuring credit quality and profitability remain intact amid tightening in specific loan categories, it said in the post-Q3 earnings investor call.
Sharp reduction in used car refinancing
The NBFC has slashed its used car refinance business, citing high bounce rates of 10-11 percent — substantially higher than the 3.5 percent bounce rate in new car loans. This has led Bajaj Finance to reduce used car loan volumes from Rs 400 crore per quarter to Rs 250 crore, focusing on more creditworthy segments, it said.
While used car purchases remain a part of the portfolio, Bajaj Finance has been selective in disbursements, prioritising new car loans, which continue to perform well. The company is limiting riskier loans while ensuring steady growth in secured asset segments.
Selective tightening across other loan segments
Beyond used car loans, Bajaj Finance has taken a prudent stance in other categories as well. In the rural B2C loan segment, while bounce rates have not been a major issue, collection efficiencies were weak earlier but are now improving. In the SME loan segment, the company has cut business by 30 percent over the last three months, though it has managed to maintain a 98.67 percent current portfolio, down slightly from 99 percent earlier. Meanwhile, personal loans (B2C) are being closely monitored for any signs of rising stress, given the broader industry trends.
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Managing credit risk amid growth
Earlier today, Bajaj Finance reported strong financial performance for the fiscal third quarter. The company posted an 18 percent year-on-year increase in net profit to Rs 4,308 crore, while assets under management (AUM) grew by 28 percent to Rs 3.98 lakh crore. It also recorded its highest-ever quarterly customer addition of 5.03 million and booked 12.06 million new loans, reflecting a 22 percent growth year-on-year.
The NBFC major’s gross NPAs rose to 1.12 percent from 0.95 percent, while net NPAs increased to 0.48 percent from 0.37 percent YoY. Despite this, management expects credit costs to remain in the 2-2.05 percent range in Q4 FY25, with improvements projected for FY26.
Bajaj Finance said that it is focused on balancing risk and growth, ensuring that while risky segments like used car refinance are curtailed, secured lending and digital expansion remain strong. The company continues to invest in distribution network expansion, adding 14 new locations and 8,900 distribution points during the quarter.
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