Sensex Surges 470 Points as RBI Liftsrestrictionson Bajaj Finance

The RBI lifted restrictions on Bajaj Finance's digital lending products, eCOM and Insta EMI Card, after the company addressed regulatory concerns. Bajaj Finance shares surged 6% following the announcement, contributing to a record high in the Indian stock market.

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Dil Bar Irshad
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Sensex Surges 470 Points as RBI Liftsrestrictionson Bajaj Finance

Sensex Surges 470 Points as RBI Liftsrestrictionson Bajaj Finance

The Indian stock market witnessed a significant surge on Friday, with the Sensex jumping 470 points to reach 75,082 and the Nifty climbing to a record peak of 22,787. The rally was primarily driven by a 6% surge in Bajaj Finance shares after the Reserve Bank of India (RBI) lifted restrictions on the company's loan sanctioning and disbursal through its digital products, eCOM and Insta EMI Card.

Why this matters: The RBI's decision to lift restrictions on Bajaj Finance has broader implications for the Indian financial sector, as it sets a precedent for other lenders to adhere to regulatory guidelines. This move is also expected to have a positive impact on the overall economy, as increased lending can lead to higher consumer spending and economic growth.

The RBI had imposed restrictions on Bajaj Finance in November 2023, directing the company to stop sanctioning and disbursing loans under its eCOM and Insta EMI Card products as a result of non-adherence to the central bank's digital lending guidelines. The restrictions were put in place because of the non-issuance of Key Fact Statements to borrowers and deficiencies in the Key Fact Statements issued for other digital loans sanctioned by Bajaj Finance.

On May 2, the company announced in an exchange filing that the RBI had lifted the restrictions on eCOM and Insta EMI Card with immediate effect. "The company remains committed to ensure adherence and compliance of regulatory guidelines," Bajaj Finance stated. In response to the regulatory restrictions, Bajaj Finance had made the necessary changes and formally requested the RBI to review and remove the restrictions.

The lifting of restrictions is expected to have a positive impact on Bajaj Finance's profitability, with analysts predicting higher customer acquisition and improved fee income. "The embargo on the two products had a significant impact on Bajaj Finance's profitability, and its new loan book was lower by 0.8 mn in Q4 and by 1.2 mn in FY24. Lifting of this ban would result in higher customer acquisition, along with improved fee income," said Avinash Singh, Senior Research Analyst at Emkay Global Financial Services.

Bajaj Finance shares rallied as much as 7.54% to ₹7,400.00 apiece on the BSE, while Bajaj Finserv shares surged more than 6%. At 9:20 am, Bajaj Finance shares were trading 6.69% higher at ₹7,341.00 apiece on the BSE. Emkay Global has kept its FY25-27 estimates unchanged and reiterated its 'Buy' rating on Bajaj Finance stock, with a March-2025 share price target of ₹9,000 apiece.

The surge in the Indian stock market was also supported by positive trends in the US markets and strong global cues. Wall Street ended with gains on Thursday, while Asian markets, including Seoul and Hong Kong, were trading in positive territory. The upbeat market sentiment and the RBI's move to lift restrictions on Bajaj Finance have set the stage for a potential further rally in the Indian equity markets.

The RBI's measures on Bajaj Finance came amid broader concerns over the unfettered growth in unsecured personal loans, especially in smaller ticket sizes. The central bank had also asked banks and non-banking financial companies (NBFCs) to increase the risk weight on their exposure to unsecured consumer credit by 25 percentage points. The lifting of restrictions on Bajaj Finance signifies the company's successful efforts to address the RBI's concerns and align its practices with regulatory guidelines.

Indian stock market continues to reach new heights, investors will closely monitor the performance of key players like Bajaj Finance and the overall market sentiment. The positive developments surrounding Bajaj Finance and the supportive global cues have created an optimistic outlook for the Indian equity markets. However, market participants will also keep an eye on domestic factors, such as corporate earnings and economic indicators, to gauge the sustainability of the current rally.

Key Takeaways

  • Indian stock market surges, Sensex jumps 470 points to 75,082, Nifty reaches record high of 22,787.
  • RBI lifts restrictions on Bajaj Finance's loan sanctioning and disbursal through digital products.
  • Bajaj Finance shares surge 6% after RBI's decision, expected to boost profitability and customer acquisition.
  • Lifting of restrictions sets a precedent for other lenders to adhere to regulatory guidelines.
  • Positive global cues and upbeat market sentiment support Indian equity market's potential further rally.