The company, known for its aggressive expansion across consumer and commercial lending, said it has adopted a ‘risk-first’ approach to preserve asset quality and long-term sustainability.
The slowdown in MSME and two-wheeler lending has led the company to adopt a more ‘balanced and prudent stance’ on asset growth this year.
“We now think growth will be in the region of 22-23%, compared to 24-25% earlier, due to a set of risk actions that we have taken in MSME business and the revised assessment provided by BHFL on its AUM growth for FY26,” Jain said in a post-earnings call with analysts for the September quarter.
The shift marks one of the first visible signs of strain at India’s largest shadow lender, which has for years delivered industry-leading growth and profitability. Bajaj Finance’s consolidated assets under management (AUM) rose 24% year-on-year in the September quarter to ₹4.62 trillion, while net profit grew 23% to ₹4,948 crore.
However, the company’s loan losses and provisions were up by 19% on year to ₹2,269 crore in the September quarter as against ₹1,909 crore in the same period a year ago.
Gross non-performing assets (GNPA) rose to 1.24% at the end of September, up from 1.03% in the previous quarter, with MSME and captive two-wheeler portfolios accounting for most of the slippage. Net NPA also increased to 0.60% as of 30 September 2025 as against 0.50% a quarter ago.
MSME loans
Brokerage Bernstein said in a note on 10 November that while Bajaj Finance’s AUM and profit growth remain strong, ‘the strains that come with scale’ are becoming more visible.
It said the deterioration in asset quality across segments and the elevated loan losses indicate rising underlying stress. The firm maintained an ‘underperform’ rating on the stock, citing challenges in sustaining high yields and asset quality at the current scale.
The MSME business has been scaled back sharply as part of risk containment measures, Jain said, adding that Bajaj Finance has cut unsecured MSME loan volume by 25% and now expects the segment to grow only 11-12% on year in FY26, down from earlier projections of nearly 20%.
“We’ve seen incipient stress across the board, it’s not regional in nature,” he said. “We’ve cut business by 25% and expect the worst to be behind us by March and June, after which we can be back in growth mode.”
For the quarter ended September, Bajaj Finance’s MSME book grew 18% on year to ₹51,718 crore.
The management also said that the restructuring in the MSME book was largely complete and that no further material impact on credit cost was expected in the coming quarters. Despite the near-term slowdown, the company remains confident of returning to higher growth in the segment by the first half of FY27.
Phasing out
The two- and three-wheeler financing business, once a core part of Bajaj Finance’s captive lending model, is also being phased out as planned, Jain said.
Though it contributes barely 1.5% of AUM, it accounts for around 9% of overall loan losses. The company said winding down this book would help improve portfolio quality metrics in the second half of the year and provide tailwinds to credit cost performance in FY27.
As of the end of September, the two- and three-wheeler loan book declined by 49% on year to ₹7,086 crore. Both MSME and two- and three-wheeler businesses account for 45% of the non-bank lender’s balance sheet.
In the meantime, other verticals are helping offset the impact. Growth in gold loans, new car loans, commercial vehicle and tractor financing is gaining momentum, contributing nearly 3% of overall AUM growth in Q2.
In terms of outstanding numbers, mortgages contributed the most to the overall AUM to ₹1.44 trillion, up 25% on year, and urban business-to-consumer loans also grew 25% YoY to ₹96,608 crore.
Rural B2C loans grew 24% to ₹22,646 crore, while AUM of car loans rose by 33% on year to ₹13,163 crore, and gold loans were up by 85% on year to ₹11,789 crore.
In a key management move, Bajaj Finance also announced the appointment of Manish Jain as its fourth deputy chief executive officer. He joins the executive management group, which includes four deputy CEOs and three chief operating officers.
Bajaj Housing Finance Ltd (BHFL), the mortgage arm, also reported a robust 24% growth in assets, despite facing competitive pressures.
