RBI's Revolving Credit Curbs Hit NBFC Flexi-Loans

The RBI's proposed ban on NBFC revolving credit didn't touch a single loan book on August 7, 2026. It still erased ₹33,500 crore from Bajaj Finance's market value in just over an hour of trading.

That's a strange number to explain, because the RBI hasn't banned anything yet. It published a draft.

The short version

• On August 6, 2026, the RBI proposed restricting NBFCs to term loans only, banning revolving/flexi-credit products for every NBFC except the two authorised to issue credit cards — SBI Card and BoB Cards.
• Bajaj Finance shares fell 5.5% to ₹1,086 on August 7, cutting its market cap from ₹7.15 trillion to ₹6.82 trillion in roughly an hour.
• Analysts can't agree on how exposed Bajaj Finance even is: Bonanza pegs flexi loans at ~25% of AUM, IIFL Capital at 15–20%, PL Capital at ~13% (₹70,000 crore) — a near 2x spread on the same undisclosed number.
• PL Capital's own math implies only a 13 basis-point net interest margin hit; Jefferies estimates a 1–1.5% EPS hit — both far smaller than the 5.5% single-day stock decline.
• Feedback on the draft closes August 28, 2026, and RBI has not yet clarified whether supply-chain financing falls inside the ban.

What Did the RBI Actually Propose?

The RBI's draft amendment to its November 2025 Credit Facilities Directions restricts NBFCs to term loans: a fixed principal, disbursed in one or more instalments, repaid on a predetermined amortisation schedule. Once repaid, the sanctioned limit cannot be restored or replenished. Revolving credit lines — the flexi-loan products that let a borrower draw, repay, and redraw the same limit — are barred for every NBFC except SBI Card and BoB Cards, the only two authorised card issuers (Business Standard).

The stated goal is curbing evergreening — borrowers servicing old debt with fresh drawdowns instead of real cash flow. Unlike banks, NBFCs typically can't see a borrower's operating cash flow directly, which makes evergreening harder to catch inside a revolving structure.

How Much of Bajaj Finance's Book Is Actually Flexi-Credit?

Nobody outside Bajaj Finance knows for certain, because the company hasn't disclosed the exact figure. Three brokerages published three different estimates within 24 hours of the draft.

That's not rounding noise. It's a near-2x range on the single number that determines how much of Bajaj Finance's ₹5.47 lakh crore AUM is even in scope — coming from three desks reading the same public filings (Business Standard).

Exposure elsewhere is smaller and more agreed-upon: Tata Capital sits in the high-single to low-double digits, Cholamandalam Investment and Finance under 1%, and L&T Finance and Poonawalla Fincorp negligible. Bajaj Finance is the outlier by a wide margin, which is exactly why it took the biggest hit.

Why Did the Stock Fall More Than the Earnings Math Justifies?

Because the math brokerages published doesn't support a 5.5% single-day drop. PL Capital's own model, assuming a 100 basis-point yield premium on flexi products, implies only a 13 bps hit to Bajaj Finance's net interest margin. Jefferies estimates flexi loans generate ~50 bps of incremental yield and projects a 1–1.5% hit to earnings per share.

Neither number gets close to justifying ₹33,500 crore in lost market value. Bajaj Finance's Q1 FY27 results, reported the same week, showed profit after tax up 27% year-on-year to ₹5,986 crore, AUM up 24% to ₹5.47 lakh crore, gross NPAs down to 0.96%, and a capital adequacy ratio of 20.9% — nothing in the credit quality points to distress (Business Standard).

What the stock priced in instead was regulatory uncertainty, not credit deterioration: fee income at risk (Bajaj Finance reported ₹2,653 crore in Q1 alone), an unresolved question over whether supply-chain financing falls inside the ban, and Macquarie's flag that FY27 loan-growth guidance of 22–24% may need revising if the flexi book has to shrink. A Citigroup analyst put it plainly — the regulatory intent is sound, but "demand for revolving credit, particularly given borrowers' uncertain cash flows," may merit more deliberation before the rule is final.

What This Means for Credit Underwriting Models

A 13-percentage-point spread on flexi-loan exposure, from three analysts looking at the same balance sheet, is a data problem before it's a policy problem. Any credit committee or investment memo that cites "Bajaj Finance's flexi-loan exposure" as a single number is really citing whichever analyst's estimate the writer happened to pull that week — without flagging that two other reputable desks would give you a materially different number.

That gap between a cited estimate and a sourced, dated, reconciled one is the exact failure point Verdict is built around: an underwriting proposal should show which estimate it used, when it was published, and how it compares against the other public estimates on the same line — not present one analyst's guess as settled fact.

None of this means the RBI's draft is wrong to worry about evergreening. It means the market spent an hour repricing Bajaj Finance on numbers that three brokerages can't agree on, and that a credit committee reading any one of those numbers in isolation would be underwriting against an estimate, not a fact. Comments on the draft close August 28, 2026, and until the RBI finalises the rule, every flexi-loan exposure figure in circulation is a placeholder wearing the certainty of a filed number. For more sourced dispatches like this one, see dekryptlabs.com/dispatches, and the underlying research approach at dekryptlabs.com/research — including our earlier look at how NBFC funding costs are already diverging from the repo rate.

Frequently Asked Questions

What did the RBI propose for NBFC revolving credit products? On August 6, 2026, the RBI proposed restricting NBFCs to term loans only, banning revolving/flexi-credit products for all NBFCs except SBI Card and BoB Cards, the two authorised credit-card issuers. Comments close August 28, 2026.

Why did Bajaj Finance shares fall after the RBI's draft norms? Bajaj Finance has the largest disclosed flexi-loan exposure among major NBFCs. Shares fell 5.5% to ₹1,086 on August 7, 2026, erasing ₹33,500 crore in market value in about an hour, driven by uncertainty over loan growth, fee income, and product redesign costs.

How much of Bajaj Finance's loan book is flexi-credit? Bajaj Finance hasn't disclosed the exact figure. Analyst estimates range from ~13% of AUM (PL Capital, ~₹70,000 crore) to ~25% of AUM (Bonanza), with IIFL Capital estimating 15–20% — a near-2x spread on the same undisclosed number.

Will the RBI's revolving credit ban affect MSME lending? Possibly. PL Capital notes any reusable credit line, overdraft facility, or flexi-loan product across corporate, MSME, and unsecured personal segments is likely in scope, though whether supply-chain financing is included remains unresolved as of the draft stage.

Abhishek Gupta is Co-Founder at Dekrypt Labs, building Verdict — AI-assisted underwriting and investment proposals. dekryptlabs.com