Bajaj Finance & RBL Bank dip as RBI allows 1 year extension for co-branded cards.

The Reserve Bank, noting “serious deficiencies” in Bajaj Finance’s compliance, approved only a one-year extension for its co-branded credit card partnership with RBL Bank until December 21, 2024. Bajaj Finance had requested a more extended extension. As of 1:15 pm, Bajaj Finance traded at Rs 7,169.95, down 1.72%, & RBL Bank at Rs 263.45, down 3.3% on the NSE.

As of now, the RBI has not permitted NBFCs to introduce credit cards. Consequently, many non-banking financial companies have chosen the co-branded approach. Bajaj Finance collaborates with RBL Bank and DBS Bank for its credit card ventures. While the partnership with DBS Bank is a year old, the association with RBL Bank has been longstanding, commencing in FY18.

As per RBL Bank’s FY23 annual report, it is among the largest credit card issuers in India with over 5 percent market share in cards in force (CIF). Analysts at Motilal Oswal estimate that co-branded cards with Bajaj Finance account for 60-65 percent of RBL Bank’s total credit card issuances.

Bajaj Finance has been facing the heat from the RBI of late. The central bank had on November 15 asked it to stop sanction and disbursal of loans under its two lending products – eCOM and Insta EMI Card – with immediate effect over non-issuance of key fact statements to the borrowers under these two lending products.

The RBI has expressed concern about the surge in unsecured consumer loans, prompting an increase in the risk weight on these loans, encompassing bank lending to NBFCs. Consequently, NBFCs like Bajaj Finance will experience an impact on both lending and borrowing activities.

In the July-September quarter, the company posted a consolidated net profit of Rs 3,551 crore, marking a 28% year-on-year increase, slightly below analysts’ expectations of a 30% rise.