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Bajaj Finance''s 2 & 3-wheeler, MSME businesses to grow slow in FY26: MD Rajeev Jain

Bajaj Finance Anticipates Slower Growth in Key Segments for FY26: Insights from MD Rajeev Jain

In a recent update that has caught the attention of investors and industry watchers, Bajaj Finance, one of India's leading non-banking financial companies (NBFCs), has signaled a cautious outlook for its two-wheeler, three-wheeler, and micro, small, and medium enterprises (MSME) businesses in the fiscal year 2026 (FY26). Managing Director Rajeev Jain, a key figure steering the company's strategic direction, shared these insights during a discussion that underscores the evolving challenges in the lending landscape. This projection comes amid a broader economic environment marked by regulatory scrutiny, shifting consumer behaviors, and competitive pressures, which are collectively influencing the growth trajectories of these core segments.

Bajaj Finance has long been a dominant player in consumer and commercial financing, with a diversified portfolio that includes personal loans, home loans, auto financing, and business loans. The company's strength in the two-wheeler and three-wheeler financing space has been particularly notable, catering to a vast market of individual buyers and small transporters who rely on these vehicles for daily mobility and livelihoods. Similarly, its MSME lending arm supports a wide array of small businesses, from local traders to emerging entrepreneurs, providing them with essential capital to expand operations. However, according to Jain, these areas are poised for subdued growth in FY26, a departure from the robust expansion seen in previous years.

Delving deeper into Jain's comments, he highlighted several factors contributing to this tempered expectation. One primary concern is the regulatory environment, where the Reserve Bank of India (RBI) has been tightening norms for NBFCs to ensure financial stability and prevent over-leveraging. Recent guidelines on risk weights, provisioning requirements, and lending practices have compelled companies like Bajaj Finance to adopt a more conservative approach. For instance, in the two-wheeler and three-wheeler segments, which often involve financing for entry-level vehicles, there has been a noticeable slowdown in demand due to economic headwinds such as inflation and rising fuel costs. Consumers, especially in rural and semi-urban areas, are delaying purchases or opting for cheaper alternatives, which directly impacts loan disbursements.

Jain elaborated that while the company remains committed to these segments, the growth rate is expected to be in the single digits for FY26, compared to double-digit expansions in prior fiscal periods. This is not an isolated issue; it reflects broader trends in the automotive and small business sectors. The two-wheeler market, for example, has been grappling with supply chain disruptions post-pandemic, coupled with a shift towards electric vehicles (EVs) that require different financing models. Bajaj Finance, being a financier rather than a manufacturer, must adapt to these changes, but the transition is gradual. Jain pointed out that the company's strategy will focus on quality over quantity, prioritizing low-risk loans to maintain asset quality and minimize non-performing assets (NPAs).

Shifting focus to the MSME business, Jain's outlook paints a picture of resilience amid caution. MSMEs form the backbone of India's economy, contributing significantly to employment and GDP. However, they have been hit hard by successive waves of economic challenges, including the lingering effects of the COVID-19 pandemic, geopolitical tensions affecting supply chains, and domestic issues like GST compliance and access to affordable credit. Bajaj Finance's MSME portfolio has historically grown through tailored products like working capital loans and equipment financing, but Jain anticipates slower disbursals in FY26 due to heightened credit risk assessments. He emphasized that the company is enhancing its digital underwriting processes to better evaluate borrower profiles, which might lead to fewer but safer loans.

To contextualize this, it's worth noting Bajaj Finance's overall performance trajectory. In recent quarters, the company has reported strong assets under management (AUM) growth, driven by other segments like consumer durables financing and urban lending. For FY25, projections remain optimistic, with analysts expecting continued momentum in these areas to offset any slowdown in the specified segments. Jain reassured stakeholders that the company's diversified model provides a buffer, allowing it to pivot resources towards high-growth areas such as digital lending platforms and partnerships with e-commerce giants. This strategic diversification has been a hallmark of Bajaj Finance's success, enabling it to weather market volatilities.

Industry experts echo Jain's sentiments, pointing out that the NBFC sector as a whole is navigating a phase of consolidation. Competitors like HDFC Bank, ICICI Bank, and other NBFCs are also recalibrating their portfolios in response to RBI's directives. For Bajaj Finance, which boasts a market capitalization in the trillions and a vast customer base, this slowdown in select segments could be a deliberate move to ensure long-term sustainability. Jain mentioned initiatives like expanding into rural financing with caution, leveraging data analytics to predict default risks, and exploring synergies with Bajaj Auto for vehicle financing – a natural extension given the group's automotive heritage.

Looking ahead, the implications of this outlook are multifaceted. For investors, it signals a need to monitor quarterly results closely, as any deviation from projected growth could influence stock performance. Bajaj Finance's shares have been volatile, reflecting broader market sentiments, but the company's track record of prudent management instills confidence. Jain's leadership, characterized by transparency and adaptability, has been instrumental in guiding the firm through past crises, such as the moratorium during the pandemic.

Moreover, this development highlights systemic issues in India's financial ecosystem. The two-wheeler and three-wheeler markets are indicators of grassroots economic health, often serving as barometers for rural prosperity. A slowdown here could ripple into related industries like manufacturing and logistics. Similarly, MSMEs, which employ millions, require supportive policies to thrive. Jain advocated for collaborative efforts between regulators, banks, and NBFCs to foster an environment conducive to growth, perhaps through incentives for green financing or simplified compliance for small borrowers.

In terms of strategic responses, Bajaj Finance is not standing still. Jain outlined plans to bolster its technology infrastructure, including AI-driven credit scoring and seamless digital onboarding, to capture emerging opportunities. The company is also eyeing expansion in underserved markets, albeit at a measured pace, to avoid overexposure. This balanced approach aligns with global trends where financial institutions are prioritizing resilience over aggressive expansion in uncertain times.

Critics might argue that this conservative stance could cede market share to agile fintech competitors, who are disrupting traditional lending with innovative models. However, Jain countered this by stressing Bajaj Finance's scale and established trust, which provide a competitive edge. The company's customer-centric innovations, such as flexible EMI options and quick approvals, continue to attract loyalty.

As FY26 approaches, the financial community will be watching how Bajaj Finance executes its strategy. Jain's projections, while cautious, underscore a proactive mindset aimed at sustainable growth. This narrative is not one of decline but of strategic recalibration in a dynamic market. For stakeholders, it serves as a reminder that in the world of finance, adaptability is key to enduring success.

In summary, Bajaj Finance's anticipated slower growth in its two-wheeler, three-wheeler, and MSME segments for FY26 reflects a confluence of external pressures and internal prudence. Under Rajeev Jain's guidance, the company is positioning itself to navigate these challenges while capitalizing on strengths in other areas. This outlook not only shapes investor expectations but also contributes to the broader discourse on India's economic resilience. As the fiscal year unfolds, updates from Bajaj Finance will undoubtedly provide further clarity on whether this tempered growth translates into long-term stability or signals deeper sectoral shifts.

Read the Full moneycontrol.com Article at:
[ https://www.moneycontrol.com/news/business/bajaj-finance-s-2-3-wheeler-msme-businesses-to-grow-slow-in-fy26-md-rajeev-jain-13322469.html ]