RBI Proposal to Bar NBFC Revolving Credit Sinks Bajaj Finance

Viral Shah, senior vice-president of equity research at IIFL Finance Ltd, estimated that such loans account for about 20% of Bajaj Finance's standalone AUM. The share is in the high single digits to low double digits for Tata Capital and less than 1% for Cholamandalam. “In our assessment, this is a feature that is prevalent across product lines for many NBFCs,” Shah said. “This can impact new customer acquisition, growth, and stickiness, especially for NBFCs that have a meaningfully higher exposure to products having this feature.” Fee income and yields could also be hit, he added, though lenders could impose prepayment charges to offset the loss.

Analysts at Sanford C. Bernstein (India) warned that flexi-loan structures allow customers to draw, repay, and redraw funds from a pre-approved credit limit without fresh underwriting. These products offer considerable repayment flexibility, including the ability to service only interest obligations for extended periods before principal repayment. “While attractive from a customer perspective, they also increase the risk of borrowers relying on incremental borrowing capacity to manage existing obligations,” Bernstein said in a note on Thursday. The primary risk is asset quality rather than growth, the analysts said. Revolving credit is a higher-risk product that requires sophisticated underwriting, monitoring, and collection capabilities. “While lenders such as Bajaj Finance may possess the systems needed to manage these portfolios, the same may not hold true across the broader industry,” the note said. “The withdrawal of revolving facilities could expose pockets of borrower stress that have so far remained masked by easy access to additional (and flexible) liquidity, resulting in a broader deterioration in repayment behaviour.”

The RBI's proposal is part of its November 2025 norms. No implementation date has been set.