Bajaj Finance Ltd cut its credit growth guidance for the current financial year to 22-23% on-year from its earlier expectation of 24-25%, as the non-bank lender grapples with emerging stress in its micro, small and medium enterprises (MSME) portfolio, managing director Rajeev Jain said. The company, known for its aggressive expansion across consumer and commercial loans, said it has adopted a ‘risk-first’ approach to preserve asset quality and long-term sustainability. The slowdown in MSME and two-wheeler loans has led the company to take a more ‘balanced and prudent stance’ on asset growth this year. “We now think growth will be in the region of 22-23%, compared to 24-25% earlier, due to a set of risk actions we have taken in MSME business and the revised assessment provided by BHFL on its AUM growth for FY26,” Jain said in a post-earnings call with analysts for the September quarter. The move is one of the first visible signs of strain at India’s largest shadow lender, which has delivered industry-leading growth and profitability for years. Bajaj Finance’s consolidated assets under management (AUM) rose 24% year-on-year to ₹4.62 trillion in the September quarter, while net profit grew 23% to ₹4,948 crore. However, the company’s loan losses and provisions rose 19% year-on-year to ₹2,269 crore in the September quarter against ₹1,909 crore in the same period a year ago. Gross non-performing assets (GNPA) rose to 1.24% at the end of September, from 1.03% in the previous quarter, with MSME and captive two-wheeler portfolios accounting for the bulk of the shift. Net NPA also increased to 0.60% from 30 September 2025 versus 0.50% a quarter ago. MSME loans Broker Bernstein said in a note on November 10 that while Bajaj Finance’s AUM and profit growth remain strong, “the strains that come with scale” are becoming more visible. The deterioration in asset quality across segments and the increased loan losses are said to point to rising underlying stress. The firm maintained an ‘underperform’ rating on the stock, citing challenges in maintaining high yields and asset quality at the current scale. The MSME business has been sharply scaled back as part of risk mitigation measures, Jain said, adding that Bajaj Finance has reduced unsecured MSME loan volume by 25% and now expects the segment to grow only 11-12% y-o-y in FY26, down from earlier projections of nearly 20%. “We’ve started to see stress across the board, it’s not regional in nature,” he said. “We have reduced business by 25% and expect the worst to be behind us by March and June, after which we can be back in growth mode.” For the quarter ended September, Bajaj Finance’s MSME book grew 18% year-on-year to ₹51,718 crore. Management also said that the restructuring in the MSME book is largely complete and that no further material impact on credit costs is expected in the coming quarters. Despite the near-term slowdown, the company remains confident of returning to higher growth in the segment by the first half of FY27. Phase-out The two- and three-wheeler financing business, once a core part of Bajaj Finance’s mortgage model, is also being phased out as planned, Jain said. Although it contributes barely 1.5% of AUM, it accounts for around 9% of overall loan losses. The company said unwinding this book will help improve portfolio quality metrics in the second half of the year and provide a tailwind of credit cost performance in FY27. By the end of September, the two- and three-wheeler loan book was down 49% year-on-year to ₹7,086 crore. Both MSME and two- and three-wheeler businesses account for 45% of the non-bank lender’s balance sheet. Meanwhile, other verticals help offset the impact. Growth in gold loans, new car loans, commercial vehicle and tractor finance is gaining momentum, contributing nearly 3% of overall AUM growth in Q2. In terms of outstanding numbers, mortgages contributed the most to overall AUM to ₹1.44 trillion, up 25% y-o-y, and urban business-to-consumer loans also grew 25% y-o-y to ₹96,608 crore. Rural B2C loans grew 24% to ₹22,646 crore, while auto loan AUM rose 33% year-on-year to ₹13,163 crore, and gold loans rose 85% to ₹11,789 crore. In an important management move, Bajaj Finance also announced the appointment of Manish Jain as its fourth deputy chief executive officer. He joins the executive management group, which includes four deputy chief executives and three chief operating officers. Bajaj Housing Finance Ltd (BHFL), the mortgage arm, also reported a strong 24% growth in assets despite competitive pressure.