Shares of Bajaj Finance and RBL Bank fell on Tuesday after Reserve Bank of India(RBI) reportedly granted a one-year extension to the co-branding partnership between these entities.
The extension is less that the term sought by Bajaj Finance, according to a report from CNBC-TV18 on Tuesday. Shares of Bajaj Finance fell 2%, and those of RBL Bank fell nearly 5% in intra-day trade on Tuesday, following release of the news report.
According to the report, RBI has pointed out serious deficiencies in Bajaj Finance’s adherence to RBI norms. A further extension from the current one-year period is subject to a review.
Spokespersons from Bajaj Finance declined to comment on the report. “RBL Bank and Bajaj Finance Limited have a long-standing co-brand partnership arrangement which was renewed in December 2021 for 5 years. We continue to issue the co-branded cards in line with RBI guidelines,” a spokesperson from RBL Bank told FE.
In 2021, RBL and Bajaj Finance had declared a co-branded partnership agreement for five years. They had initially received a two-year permit from the RBI. However, when it applied for an extension this year, the regulator gave it only for a year, said industry sources.
This is not the first time that Bajaj Finance has faced regulatory challenges. In November, RBI asked the company to stop issuing new loans through ‘eCOM’ and ‘InstaEMI Card’ due to non-compliance with digital lending guidelines.
Currently, many non-banking financial companies like Bajaj Finance are offering credit cards to their customers by partnering with banks. The company’s parent Bajaj Finserv has co-branded partnerships with RBL Bank and DBS Bank.
These partnerships enable the non-bank lender to capitalise on the sharp rise in credit card spends. In a recent note, brokerage Motilal Oswal Financial noted that the partnership with Bajaj accounts for 60-65% of new card issuances.
According to RBL Bank’s annual report for 2022-23(April-March), it is among the largest credit card issuers in India with a cards-in-force market share of more than 5%.