By VarunVyas Hebbalalu and Siddhi Nayak
BENGALURU (Reuters) -Indian non-banking financial company (NBFC) Bajaj Finance reported a smaller-than-expected rise in quarterly profit on Monday, hit by a regulatory ban on two of its lending instruments and higher bad loan provisions.
In November, India’s central bank banned Bajaj Finance from issuing loans under eCOM and Insta EMI Cards, saying the lender did not issue key information to borrowers.
The company’s consolidated profit after tax rose 22.4% to 36.39 billion rupees (about $438 million) in the quarter ended Dec.
31 from a year earlier. Analysts, on average, expected a profit of 37.56 billion rupees, according to LSEG data.
Consolidated numbers include the businesses of the lender’s subsidiaries, Bajaj Housing Finance and Bajaj Financial Securities.
The company did not specify how much of its portfolio comprised loans given under the two products, but said the loan losses and impact of regulatory action led to profit growth being lower by 5% to 6%.
Bajaj Finance has conducted a “comprehensive review” of central bank guidelines on digital lending and is implementing “requisite corrective action”, Managing Director Rajeev Jain said in a post-earnings analyst call, without specifying the actions taken.
Bajaj Finance will fully comply with the executive order “at the earliest”, he said.
Separately, the company is also engaging with the regulator and RBL Bank to sort out deficiencies in the Bajaj Finance-RBL co-branded credit card, Jain added.
Higher risk weights had an impact of 290 basis points on Bajaj’s capital adequacy ratio, Jain said, adding that future growth in the unsecured segment will be “calibrated”.
Exuberant personal loan and credit card lending led the Reserve Bank of India to increase capital requirements for the segment in November.
Bajaj Finance’s loan provisions, the money set aside to cover potential defaults, rose more than 48% on year to 12.48 billion rupees.
($1 = 83.1300 Indian rupees)
(Reporting by Varun Vyas in Bengaluru and Siddhi Nayak; Editing by Savio D’Souza, Eileen Soreng and Mrigank Dhaniwala)
