Bajaj Finance trims exposure to ‘imprudent borrowers’ in rural, urban areas

Mumbai: Bajaj Finance has preemptively reduced business by 8-14% in urban and rural areas to customers who already have a number of small ticket loans, managing director Rajeev Jain told analysts on Tuesday.

“We have cut between 8-14% of the business in urban and rural (14% in rural and 8% in rural) as a preventive measure to those who have more small ticket loans. While they may be short term in nature, they represent imprudence. We would have liked to publish this data but for technical reasons we could not publish,” said Jain.

Jain had said in July that Bajaj Finance was working on a leverage analysis and planned to share an update in October, eventually publishing it annually. To be sure, Jain has been highlighting the growth in leverage among a section of borrowers in the industry and had said it was taking preemptive steps to “stay out of trouble”.

“We wanted to really publish, we were ready but principally the (credit) bureau technically did not allow us to publish and rightfully so. We can share some updates,” said Jain.

According to Jain, the internal analysis of industry-level data showed that the number of personal loans disbursed grew between FY20 and FY23.

“The way it is looking is that FY20, FY22 and FY23 in terms of the count of loans India was disbursing across all personal loans have grown from 45 million (in FY20), to 70 million in FY22, to 107 million in FY23. The larger growth principally seen was in less than ₹50,000 and in ₹800,000-plus,” said Jain.

The total assets under management (AUM) of the segment at an industry level, Jain said, grew from ₹7.5 trillion in FY20 to ₹13.5 trillion in FY23.

“What it principally says is that at an industry level, 93.73% of the total balances of the ₹7.5 trillion used to be current (being regularly repaid) in FY20. That number in FY22 was 91.75% and in FY23 was 92.21% at the industry level,” he said.

Comparing these industry numbers to Bajaj Finance portfolio showed that in FY20 98.2% of its personal loans were current; as of FY22 it was at 97.12% and in FY23 it was at 98%.

“Those who have more of these less-than- ₹50,000 loans (it) does not mean they are leveraged but are more imprudent,” he said, adding that Bajaj Finance is looking at this data very closely on a month-on-month basis and taking decisions to ensure it continues to protect the credit risk and portfolio risk in the company.

Bajaj Finance on Tuesday reported a consolidated net profit of ₹3,551 crore, up 28% from the same period last year. Its AUM grew 33% year-on-year (y-o-y) to ₹2.9 trillion and interest income showed a growth of 38% to ₹11,734 crore. In Q2, the company said it added 3.58 million new customers, taking the total customer base to 76.56 million as of 30 September.

“I would say it was a good quarter,” said Jain.

The lender's gross and net non-performing asset (NPA) ratios were at 0.91% and 0.31%, respectively, as of 30 September, as against 1.17% and 0.44% as of 30 September 2022.

Bajaj Finance shares closed at ₹8,091.35 apiece on Tuesday on the BSE, up 0.73% from the previous close.