Mumbai: Bajaj Finance continues to tighten its underwriting norms for a cohort of customers on the back of data that showed those with multiple unsecured loans exhibit greater probability of default, its managing director Rajeev Jain said on Tuesday.
“When we looked at the portfolio movement across secured and unsecured portfolios, one thing stood out in general that those clients who have more than three or more live unsecured loans are showing higher propensity to default and have lower collection efficiencies,” Jain told analysts after announcing the lender’s September quarter financials. “As we looked at the data, we are continuing to tighten our underwriting norms for such cohorts of customers across all such products in an intelligent manner.”
While banks are seeing a decline in the pace of unsecured loan growth, certain segments are starting to see more defaults. Customers are delaying repayments on credit cards and personal loans, leading to a rise in delinquencies after months of bingeing on small-ticket consumption loans, Mint reported on 25 September. The volume of credit card dues where repayments are delayed by over 90 days has increased 17 basis points (bps) year-on-year to 1.8% in June, showed data from credit bureau TransUnion Cibil.
Quarterly result
Bajaj Finance witnessed a deterioration in asset quality in the September quarter. On a consolidated basis, its gross non-performing assets (NPA) and net NPA stood at 1.06% and 0.46%, respectively, as of 30 September against 0.91% and 0.31% a year earlier. Its loan losses and provisions rose 77% on a year-on-year to ₹1,909 crore.
“On a consolidated basis, I would say (it was) a mixed quarter for us as a firm. (It was a) good quarter in terms of volume, assets under management and operating efficiencies. Loan losses remain elevated in Q2 as well, as they were in Q1 and as a result profit growth and return on assets were muted for the quarter,” said Jain.
Jain added that credit cost was the dampener for the quarter, even as Bajaj Finance managed to do well on AUM, NIM, managing expenses. “It was across all retail and SME lines of business and not restricted to any one segment or geography. We as a prudent company continue to take risk actions.”
Meanwhile, its cost of funds stood at 7.97% in the September quarter, an increase of 3 basis points over Q1 FY25. Jain said the cost of funds for the company has peaked. Bajaj Finance’s deposit book grew 21% on year in Q2 to ₹66,131 crore, and deposits contributed 20% of consolidated borrowings as of 30 September.
“Deposit book growth is obviously softer given that there is a significant amount of price war that is happening across the system and given the fact that the company has found other alternative sources which are more attractive in terms of coupon,” said Jain.
