Shares of Bajaj Finance and Bajaj Finserv fell as much as 5% on the BSE on Friday after the Reserve Bank of India (RBI) proposed restricting NBFCs to offering only term loans, effectively barring them from providing revolving credit facilities.
This restriction, however, will not apply to NBFCs already authorised to issue credit cards, the central bank said.
Shares of Bajaj Finance fell 4.5% to trade at Rs 1098.10 apiece on the BSE, while those of Bajaj Finserv dropped 3% to Rs 2020.35 on the BSE.
"NBFCs shall only offer credit products which are like term loans and shall not offer any revolving credit products. Provided that the aforesaid restriction shall not be applicable to an NBFC authorised by the Reserve Bank to issue credit cards," the central bank said in the circular released on Thursday.
The amendment will come into force immediately after the final guidelines are issued.
Standalone NBFCs require explicit prior regulatory approval and a minimum net-owned fund of Rs 100 crore to issue credit cards independently. Some NBFCs offer co-branded credit cards in partnership with banks.
While the central bank encourages innovation in financial systems and credit products and is overall in favour of deregulation, it brings in such prudential norms as safeguards.
Revolving credit is any fund-based credit facility wherein lenders set a credit limit, and customers can borrow money, pay it back and borrow again within the limit. Bank overdraft accounts and business working capital lines are examples, besides credit cards.
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A term loan, on the other hand, refers to a fund-based credit facility of a fixed principal amount, disbursed in one or more instalments and repayable either as periodic instalments or as a bullet payment on the stated due date. Once disbursed, the sanctioned limit of a term loan cannot be restored or replenished upon repayment of either the whole or a part of the principal amount.
