Fri Jul 25 05:10:00 UTC 2025: ## Bajaj Finance Flags MSME Loan Stress Despite Strong Q1 Profits

**Mumbai:** Bajaj Finance, India’s largest retail NBFC, reported a robust 22% increase in consolidated profit after tax to ₹4,765 crore for the April-June quarter. Net interest income also rose by 22% to ₹10,227 crore. However, the company flagged “unexpected” stress in its unsecured micro, small, and medium enterprises (MSME) loan portfolio, citing over-leverage among customers and a slowdown in disbursements.

Rajeev Jain, Vice Chairman and Managing Director, highlighted that customer over-leverage across product segments is a key concern. The company is actively working to reduce exposure to customers with multiple loans to mitigate risk.

Loan loss and provisions increased by 26% year-on-year to ₹2,120 crore, primarily driven by early-stage delinquencies in two- and three-wheeler loans (which are being phased out by March 2026) and business and professional loan segments. The company expects slower growth in these segments for the remainder of FY26.

While assets under management (AUM) are projected to grow by around 15%, incremental disbursements are expected to remain flat to lower for the rest of the fiscal year. Jain indicated that stress in the unsecured MSME book could potentially affect the secured portfolio as well.

To address the MSME loan issues, Bajaj Finance is offering restructuring options to borrowers facing temporary cash flow problems. The company restructured ₹219 crore of “standard” loans during the quarter, significantly higher than the usual rate.

Gross non-performing assets (NPA) ratio rose to 1.03% from 0.86% a year ago, with the net NPA ratio increasing to 0.50% from 0.38%. The management anticipates credit costs to remain around 1.85-1.95% for FY26 and start declining from the third quarter onwards.

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