The central bank's draft proposal limits non-banking lenders to fixed-schedule term loans, prompting institutions like Bajaj Finance and Tata Capital to pilot compliant alternatives. Tata Capital plans to shift over half of its flexi-credit book into these modified structures, keeping pricing comparable to older offerings. The firm anticipates minimal disruption because flexi loans constitute only 2% to 2.5% of its total portfolio, mostly serving micro, small, and medium enterprises. Across the broader sector, exposure remains contained as revolving facilities represent roughly ₹2 lakh crore of the total ₹30 lakh crore loan market.
Key points
Non-banking financial companies are shifting borrowers to fixed-schedule term loans to pr…: Non-banking financial companies are shifting borrowers to fixed-schedule term loans to prepare for incoming regulatory curbs.
Major lenders expect minimal operational disruption because revolving credit accounts for…: Major lenders expect minimal operational disruption because revolving credit accounts for a small fraction of their total assets.
Potential margin compression and growth slowdowns are being mitigated early through the p…: Potential margin compression and growth slowdowns are being mitigated early through the proactive rollout of alternative credit products.
Sources checked by our analysis pipeline: 1
Bajaj Finance has introduced new term-loan variants, while Tata Capital has begun piloting modified flexi-loan products and plans further trials this month.
The RBI's August draft proposes that NBFCs, except authorised credit card issuers, offer only term loans. These may be disbursed in instalments but must follow a predetermined repayment schedule; the repaid principal cannot replenish the sanctioned limit. Revolving facilities, by contrast, let borrowers draw, repay and borrow again within an approved limit, an arrangement particularly useful for working capital needs.
Jain said a complete ban could temporarily affect assets under management and cause a marginal compression in net interest margins and profitability. However, the company is preparing alternatives rather than waiting for the RBI's final decision.
Tata Capital expects to convert more than half of its flexi-credit portfolio into modified products without a revolving facility. Managing director and CEO Rajiv Sabharwal said the company had already tested some alternatives and would begin testing the remaining variants in early November.
"Our modified products are almost at a similar price like the flexi loans," Sabharwal said during the October 27…
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