RBI's Draft Ban on NBFC Revolving Credit: Why Flexi Loans and Bajaj Finance Are in the Spotlight

A draft RBI rule would limit NBFCs to term loans and end flexi-credit lines. What it proposes, who is exposed, and what is still undecided.

Few regulatory drafts have moved NBFC share prices as quickly as the Reserve Bank of India's August proposal to bar non-bank lenders from offering revolving credit. Months later it is still a draft, and lenders are still planning around it. The result will decide how some of India's largest consumer lenders design their products.

What the draft says

Released on 6 August 2026, the draft amends the RBI's NBFC credit facilities directions. It would let NBFCs offer only term loans: a facility with a fixed principal, repaid on a set schedule, either in instalments or as a single bullet payment. Once the principal is repaid, the limit cannot be restored. Anything that does not meet this definition counts as revolving credit, which probably covers cash credit, overdrafts and open-ended working-capital lines. Credit cards from RBI-authorised issuers, and bullet repayment loans, sit outside the proposal.

Think of a term loan as a bus ticket: you pay for a route and it ends. A revolving line is more like a metro card you keep topping up. The RBI's worry, as reported, is evergreening, where an old loan is kept looking healthy by paying it with fresh drawdowns instead of real cash flow. Banks can usually see a borrower's cash flows; NBFCs often cannot, which makes this harder to catch.

Who is exposed

Estimates differ, and they are brokerage estimates, not company disclosures. Business Standard reported that Bajaj Finance fell nearly 6% after the draft. IIFL Capital put flexi-credit at about 15% of its consolidated assets under management (AUM), while PL Capital estimated roughly ₹70,000 crore, or 13% of AUM. Tata Capital's exposure was estimated in the high single to low double digits. Cholamandalam, L&T Finance and Poonawalla Fincorp were seen as having little exposure.

On earnings, Jefferies estimated flexi loans earn about 50 basis points of extra yield and projected a 1-1.5% hit to Bajaj Finance's earnings per share. PL Capital estimated only a 13 basis point hit to its net interest margin. Fee income is another area of concern: Bajaj Finance reported ₹2,653 crore for the June quarter.

What Bajaj Finance's latest numbers show

Bajaj Finance's Q2 FY27 results, as summarised by INDmoney, showed consolidated profit of ₹6,367 crore, up 29%, net interest income of ₹13,335 crore, and AUM of about ₹5.85 lakh crore. Gross NPA was 1.06%, down from 1.24% a year earlier. The shares still fell, which the article attributed to worries about margin pressure from higher borrowing costs, the revolving credit draft (flexi loans being roughly 5% of AUM on brokerage estimates), possible insurance commission changes, and dilution from a planned ₹17,500 crore capital raise. These are the article's explanations, not company statements.

What happens next

Industry body FIDC wrote to the RBI on 27 August and met Deputy Governor S C Murmu on 3 September. It has asked for limited redraws within fixed-limit, fixed-maturity facilities, and for clarity on supply chain finance and loans against securities. The RBI has not announced decisions. A blog post from 13 October suggests the final rules could come around early November, but that is an estimate, not an announced date. The draft mentions no transition period, so it is unclear whether existing facilities could run to maturity.

Why it matters for risk teams

Whatever the final text, lenders should map every product that lets a borrower redraw, model a shift to term loans, and think about how to monitor cash flow where they lack visibility. Borrowers may see fewer flexible limits and more formal top-up loans.

Key takeaways

- The 6 August draft would restrict NBFCs to term loans and bar restoring a repaid limit, ending flexi-credit as currently structured. - Bajaj Finance is the most exposed large lender on brokerage estimates, though analysts disagree on how large the earnings hit would be. - The rule is not final: watch for decisions on redraw flexibility, supply chain finance and any transition period.

Sources

- [RBI's draft revolving credit curbs drag NBFC stocks - Business Standard](https://www.business-standard.com/finance/news/rbi-s-draft-revolving-credit-curbs-drag-nbfc-stocks-bajaj-finance-down-6-1260807016051.html) - [RBI Draft on NBFC Revolving Credit: What to Do Now - NBFC Advisory](https://nbfcadvisory.com/rbi-draft-nbfc-revolving-credit/) - [Bajaj Finance Q2 Results: Profit Jumps 29%, So Why Did Shares Fall 4%? - INDmoney](https://www.indmoney.com/blog/stocks/bajaj-finance-q2-results-share-fall-q2-results)

Tags: RBI NBFC flexi loans revolving credit Bajaj Finance