Even as Bajaj Finance posted its strongest quarterly profit in years—₹4,875 crore, up 21.9% year-over-year—its stock tumbled 6.9% the very next day. The disconnect isn’t a glitch. It’s a signal. Investors aren’t just watching how fast the company grows anymore. They’re staring at how shaky the foundation has become.
Strong Numbers, Softer Heartbeat
Bajaj Finance, the Pune-based powerhouse of the Bajaj Group, reported its Q2FY26 results on November 10, 2025. Net interest income (NII) hit ₹10,785 crore, a 22% jump from ₹8,838 crore a year earlier. Assets under management (AUM) surged to ₹4.62 lakh crore, up 24% from ₹3.74 lakh crore in the same period last year. New loan bookings jumped 26%, and the customer base now stands at 110.64 million—over 4 million added in just three months.
But here’s the twist: Wall Street expected ₹4,969 crore in profit after tax. Bajaj Finance delivered ₹4,875 crore. A ₹94 crore gap. Small in absolute terms. Devastating in sentiment.
The Asset Quality Crisis Beneath the Surface
Why the sell-off? Because the numbers hiding in the fine print are screaming.
Its gross non-performing assets (GNPA) climbed to 1.24% from 1.06% a year ago—and even worse, from 1.03% just the quarter before. Net NPAs rose to 0.60%, up from 0.46% YoY and 0.50% QoQ. Loan loss provisions jumped 19% year-on-year. That’s not a blip. That’s a trend.
Analysts had assumed growth would come with cleaner books. Instead, Bajaj Finance is chasing volume in a tightening credit environment. The company’s deposit book grew over 5% YoY, but that’s not enough to offset rising funding costs. Margins are under pressure. And while new loans are booming, the risk profile of those loans? Less clear.
“This isn’t about one bad quarter,” said Rajesh Mehta, a senior analyst at Mumbai-based FinTrack Research. “It’s about whether the growth engine is now running on fumes. When NPA creep starts accelerating while profits are still rising, you’re seeing the classic signs of a credit cycle turning.”
A Pattern Emerging Across the NBFC Sector
Bajaj Finance isn’t alone. HDFC Ltd’s consumer finance arm saw NPA levels rise slightly in Q2. Indifi Technologies reported higher delinquencies in its SME portfolio. Even SBI Cards flagged increased stress among younger borrowers.
What’s changed? The Reserve Bank of India’s tightening stance since early 2024. Higher interest rates, slower income growth for informal sector borrowers, and a pullback in consumer spending are hitting NBFCs hardest. They lend to the margins—small businesses, gig workers, first-time borrowers. When the economy slows, those are the first to stumble.
And unlike banks, NBFCs don’t have the same buffer of low-cost deposits. Their funding costs are higher. Their risk appetite, until now, was higher too.
What’s Next for Bajaj Finance?
The company hasn’t issued guidance. No roadmap. No mention of tightening underwriting standards. That silence is louder than any earnings call.
Investors are now pricing in a new reality: growth without discipline is no longer a virtue. The market used to reward Bajaj Finance for its 20-30% annual expansion. Now, it’s punishing it for every basis point of NPA creep.
Historically, Bajaj Finance’s P/E ratio hovered around 35x. After the Q2 results, it dropped to 28x—the lowest since 2021. That’s not just a correction. It’s a re-rating.
One thing’s certain: the days of blind faith in NBFC growth are over. Investors are now asking: How many more quarters can profits rise while asset quality decays? And when does the cost of growth become too high?
Why This Matters for Every Indian Investor
If you hold mutual funds, ETFs, or even direct shares in financial services, this is your wake-up call. Bajaj Finance isn’t just a stock. It’s a bellwether. It’s in over 40% of India’s top mutual funds. Its performance shapes how analysts value the entire NBFC sector.
What happened here isn’t an isolated incident. It’s a structural shift. The market is moving from “growth at all costs” to “growth with resilience.” And companies that can’t adapt? They’ll be left behind.
Frequently Asked Questions
Why did Bajaj Finance’s stock fall despite strong profit growth?
Despite a 22% jump in profit, Bajaj Finance missed analyst expectations by ₹94 crore and reported rising non-performing assets (GNPA at 1.24%, NNPA at 0.60%). Investors are now prioritizing asset quality over revenue growth, especially as credit costs rise and margins narrow. The market punished the stock for signaling weakening loan performance amid aggressive expansion.
How do Bajaj Finance’s NPA levels compare to industry peers?
Bajaj Finance’s GNPA of 1.24% is higher than the sector average of 1.05% for large NBFCs, though still below some mid-sized lenders. HDFC Consumer Finance reported GNPA at 1.18%, while Indifi Technologies saw GNPA rise to 1.55%. Bajaj’s advantage was always lower defaults—but that edge is eroding, raising concerns about its underwriting discipline.
What caused the spike in loan loss provisions?
Loan loss provisions rose 19% year-over-year due to increased delinquencies in small-ticket personal loans and SME financing, especially in Tier-2 and Tier-3 cities. Rising interest rates have strained repayment capacity among informal sector borrowers, and Bajaj’s aggressive customer acquisition—adding 4 million new users in one quarter—may have diluted credit screening standards.
Is Bajaj Finance still a safe investment?
It depends on your risk tolerance. Bajaj Finance remains the most liquid and well-managed NBFC in India, with deep customer penetration and strong brand trust. But its valuation has reset. Investors now demand proof of sustainable asset quality, not just growth. Short-term volatility is likely, but long-term resilience hinges on how quickly the company tightens underwriting.
What does this mean for other NBFCs in India?
Bajaj Finance’s reaction is a warning shot. Other NBFCs with high growth and rising NPAs—like Lendingkart and Muthoot Finance—could face similar investor skepticism. The era of celebrating top-line growth without scrutiny is over. Profitability alone won’t move the needle anymore.
When will we know if Bajaj Finance has turned the corner?
Watch Q3FY26 results, due in February 2026. If GNPA stabilizes below 1.25% and provisions decline, it’s a sign of tighter controls. If new loan growth slows to 15-18% while NPA stays flat, that’s a healthier balance. The market will reward discipline—not just scale.