Synopsis: Bajaj Finance's share price soars as RBI lifts restrictions on eCom and Insta EMI Card, restoring investor confidence.
Bajaj Finance share price surged over 7% in early trade on Friday following the Reserve Bank of India (RBI) lifting restrictions on the company’s two products, eCOM and online digital ‘Insta EMI Card’.
Bajaj Finance shares soared as much as 7.54% to Rs. 7,400.00 each on the BSE, while Bajaj Finserv shares also saw a rise of over 6%.
The non-banking finance company, Bajaj Finance, announced it would resume sanctioning and disbursing loans in these two business segments, including the issuance of EMI cards.
“...the RBI, via 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," Bajaj Finance stated in a stock exchange filing on Thursday.
On November 15, 2023, the RBI had instructed Bajaj Finance to cease sanctioning and disbursing loans under its two lending products, ‘eCOM’ and ‘Insta EMI Card’, with immediate effect.
The RBI's action against Bajaj Finance followed the NBFC's failure to comply with the central bank’s digital lending guidelines, particularly the non-issuance of key fact statements to borrowers under the two lending products.
Analysts believe that while the RBI's removal of these restrictions was anticipated, the swift resolution within less than 6 months not only surprises positively but also validates the company’s management's ability to rectify course promptly when necessary.
“The embargo on the two products had a notable impact on Bajaj Finance’s profitability, with its new loan book being lower by 0.8 million in Q4 and by 1.2 million in FY24. Lifting this ban is expected to lead to higher customer acquisition along with improved fee income," noted Avinash Singh, Senior Research Analyst at Emkay Global Financial Services.
The timely resolution of the restriction instills confidence in the FY25 outlook and raises expectations for RBI approval for the renewal of Bajaj Finance's co-branded credit card with RBL Bank in December 2024.
Emkay Global maintained its FY25-27 estimates unchanged and reaffirmed its ‘Buy’ rating on Bajaj Finance stock. The March 2025 Bajaj Finance share price target remains unchanged at Rs. 9,000 per share.
Last week, Bajaj Finance reported a consolidated net profit of Rs. 3,825 crore for the fourth quarter of FY24, marking a 21% year-on-year (YoY) growth. 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) surged 28% during Q4 to Rs. 8,013 crore.
At 9:20 am, Bajaj Finance shares were trading 6.69% higher at Rs. 7,341.00 on the BSE.
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Related Questions
1. What were the specific restrictions imposed by the RBI on Bajaj Finance's eCom and Insta EMI Card?
The RBI imposed restrictions on Bajaj Finance's eCom and Insta EMI Card products, prohibiting the company from sanctioning and disbursing loans under these offerings due to non-compliance with digital lending guidelines.
2. How did the lifting of restrictions impact Bajaj Finance's share price and market performance?
Following the RBI's decision to lift the restrictions on its eCom and Insta EMI Card products, Bajaj Finance experienced a significant surge in its share price, jumping over 7% in early trade. This lifting of restrictions also contributed to renewed investor confidence in the company's operations and future prospects.
3. What actions did Bajaj Finance take to address the RBI's concerns regarding its eCom and Insta EMI Card products?
Bajaj Finance undertook remedial actions in response to the RBI's concerns, leading to the lifting of restrictions on its eCom and Insta EMI Card products. These actions likely included addressing compliance issues outlined by the RBI and implementing measures to ensure adherence to digital lending guidelines.
4. How does the RBI's decision to lift restrictions impact Bajaj Finance's outlook for FY25?
The lifting of restrictions by the RBI enhances confidence in Bajaj Finance's outlook for FY25, potentially boosting investor confidence, customer acquisition, and overall performance. This decision signals the company's ability to adapt to regulatory changes and maintain business continuity.
