Bajaj Finance Crashes 6% After RBI’s Big Ban on Flexi Loans
On 7 August 2026, Indian financial markets witnessed sharp selling in non-banking financial companies (NBFCs). The biggest casualty was Bajaj Finance, which fell as much as 5.5–6%, while Bajaj Finserv dropped around 3–4%. The trigger was a major draft regulation released by the Reserve Bank of India (RBI).
What Exactly Has RBI Proposed?
The RBI has released draft amendments to the Non-Banking Financial Company (Credit Facilities) Directions. The key proposal is clear and strict:
NBFCs shall only offer term loans and shall not offer any revolving credit products.
Exception: Only those NBFCs that are specifically authorised by the RBI to issue credit cards (currently SBI Card and BoB Cards) are exempt.
Term Loan vs Revolving Credit – Simple Explanation
| Feature | Term Loan (Allowed) | Revolving Credit (Proposed Ban) |
|---|---|---|
| Loan Amount | Fixed | Flexible limit |
| Repayment | Pre-decided schedule (EMI or bullet) | Borrower can repay & re-borrow |
| Limit after repayment | Cannot be restored | Limit gets replenished |
| Common Products | Personal loan, home loan, auto loan | Flexi loans, overdraft-style facilities |
Alt Text: Bajaj Finance headquarters building logo
Why Did Bajaj Finance Fall the Most?
According to brokerage estimates (IIFL & others):
- Bajaj Finance has the highest exposure to revolving/flexi products — around 15–20% of its AUM.
- Tata Capital has high single-digit to low double-digit exposure.
- Cholamandalam has very low exposure (under 1%).
Because Bajaj Finance has built a large and profitable book around flexible credit products, the market reacted sharply.
Broader Impact on the NBFC Sector
- Product Redesign: NBFCs will have to convert flexi products into pure term loans.
- Customer Experience: Borrowers who liked the flexibility of withdrawing and repaying multiple times will find the new structure less convenient.
- Competition with Banks: Banks already offer overdraft and revolving facilities. This move may reduce the competitive edge of NBFCs.
- Existing Loans: It is still unclear whether existing revolving facilities will be grandfathered or also need conversion.
Important Timeline
- Draft released: 6–7 August 2026
- Public comments invited till: 28 August 2026
- Once final guidelines are notified, they will come into force immediately.
What Should Investors Do?
- This is still a draft. Final rules may have some relaxations after industry feedback.
- Bajaj Finance remains a high-quality franchise with strong retail franchise and asset quality.
- Short-term volatility is expected until clarity emerges.
Conclusion
RBI’s proposal is a significant regulatory shift aimed at bringing more discipline in NBFC lending. While it protects the system, it has created near-term pain for companies like Bajaj Finance that successfully scaled flexi loan products.
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