Bajaj Finance Sees Credit Costs Moderating in FY27, Despite Excluding Geopolitical Risks
Bajaj Finance Guides for Moderation in Credit Costs in FY27
Bajaj Finance, a leading financial services company, has provided guidance on credit costs for the fiscal year 2027 (FY27) in its analyst call on April 29. The company expects a moderation in credit costs to 145-160 basis points in FY27, despite not factoring in potential geopolitical disruptions.
In the March quarter of FY26, Bajaj Finance reported credit costs of Rs 2,126 crore, with recoveries of Rs 260 crore bringing net credit costs to Rs 1,866 crore, or 165 basis points. For the full year, credit costs stood at Rs 7,934 crore, translating to 175 basis points.
The company's guidance does not incorporate any potential impact from geopolitical developments, but rather is based on a view of a stabilising operating environment with some degree of conservatism built into the assumptions. Vice Chairman Rajiv Bajaj clarified that the company is entering the year with tailwinds on credit costs and sufficient momentum to navigate any potential weakening in the macro environment.
Bajaj Finance's Opex Strategy to Drive Returns
Beyond asset quality, Bajaj Finance reiterated its long-term return metrics, guiding for return on assets (RoA) in the range of 4.3-4.7 percent. Rajiv Bajaj indicated that operating efficiency, rather than margin expansion, will be the key driver of returns going forward.
Historically, RoA has remained strong across cycles, supported by the company's ability to calibrate margins, costs, and credit expenses depending on the operating environment. Currently, RoA stands at 4.6 percent, with adequate headroom to sustain these levels without requiring further expansion in net interest margins.
MSME Growth
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The MSME portfolio, which had earlier accounted for around 35 percent of the book, has been reduced by about 6 percentage points and is expected to stabilise, with growth likely to pick up gradually. The management noted that growth guidance is based on a view of a stabilised macro and geopolitical backdrop.
| Quarter | Credit Costs (Rs Cr) | Recoveries (Rs Cr) | Net Credit Costs (Rs Cr) | Credit Costs as a % of Assets |
|---|---|---|---|---|
| FY26 (March Q) | 2,126 | 260 | 1,866 | 165 basis points |
| FY26 (Full Year) | 7,934 | - | 7,934 | 175 basis points |
Note: The table above shows the credit costs, recoveries, and net credit costs for the March quarter and full year of FY26, as well as the credit costs as a percentage of assets.
Investor Takeaway
Bajaj Finance expects a moderation in credit costs in FY27, driven by improving asset quality and tailwinds in the credit cycle.
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