The economic slowdown has made Indians think twice before buying a car or upgrading their gadgets. In addition, they also hesitate to finance their desires through loans. A Few quarters before has showed signs of consumption slowdown. Bajaj Finance’s current caution loans emphasize that consumption demand remains weak.
In the June quarter, the consumer lender booked 29% more new loans than it did a year ago. This is half the growth rate the company reported in the previous quarters. Bajaj Finance said that as a prudent measure, it has tightened underwriting standards for loans to finance two-wheeler and three-wheeler purchases.
As a result, the lender worried enough to check for credit quality. Besides, hit from any small businessman involved in the auto supply chain, will make it unsafe for him to leverage more through borrowings. Bajaj Finance doesn’t want to be part of such unhealthy leverage.
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Bajaj Finance has tightened underwriting standards in digital product financing in urban and rural business leading to approximately 15-18% cut in new disbursements. The hit on disbursements would be 10-12% in the case of auto loans due to the tightening.
Consequently, investors frighten because this means that the consumer lender may not report as high as it has been so far. For the June quarter, its assets under management grew by 41% on a consolidated basis, similar to previous quarters. Ergo, the over 4% fall in its stock on Thursday can be explained from the fact that growth has slowed, albeit by design.
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Bajaj Finance
Bajaj Finance is an Indian non-banking financial company. It is a subsidiary of Bajaj Finserv. The company originally was Bajaj Auto Finance Limited. It launched on March 25, 1987. It previously focused to provide two and three-wheeler finance. However, their business model now revolves around giving individuals loans to finance their consumption. They aim to provide the most convenient method of equated monthly installments.
