RBI’s revolving credit proposal may hit Bajaj Finance, Tata Capital

The Story in Brief

The Reserve Bank of India has proposed a draft rule that would restrict non-banking finance companies and housing finance companies from offering revolving credit facilities, allowing only term loans with fixed repayment schedules. NBFCs authorised to issue credit cards are exempt. According to brokerage IIFL, Bajaj Finance has the highest exposure, with revolving credit products making up 15% of consolidated assets under management and 20% of standalone AUM. Tata Capital's exposure is in the high single digits to low double digits, while Cholamandalam Investment has less than 1% and L&T Finance has none.

IIFL expects the proposal to hurt customer acquisition, growth and stickiness for lenders with significant revolving credit exposure. Lenders may offset some impact through prepayment charges or product redesign, but the fee and yield profile could come under pressure. Morgan Stanley notes that if the final framework applies only to fresh loans and grandfathers existing facilities, the impact would be substantially lower. Some demand may shift to credit cards, potentially benefiting issuers like SBI Cards.