MUMBAI — The first thing Bajaj Finance’s Q1 FY27 numbers tell you is how good last year was. Net profit rose 14% to Rs 4,376 crore for the April-to-June quarter, an outcome that in most industries would be celebrated. In the context of the 28% profit growth Bajaj posted in Q1 FY26, and with credit costs hitting 2.09% annualised — the highest in six quarters — 14% is a number that demands an explanation.
The explanation runs through India’s unsecured consumer lending market, which Bajaj Finance built and largely still defines. The company extended credit through 1.01 crore new loan accounts in Q1 FY27. Its assets under management crossed Rs 3,93,000 crore, a 22% increase year-on-year. But the gross non-performing asset ratio climbed to 1.08% from 0.86% in the same quarter of FY26, and net NPA moved to 0.44% from 0.32%. The math is simple: Bajaj lent more, and a slightly larger fraction of that lending is not paying back on schedule.
| Company | AUM (Rs Cr) | NII (Rs Cr) | PAT (Rs Cr) | Gross NPA | YoY PAT |
|---|---|---|---|---|---|
| Bajaj Finance | 3,93,000 | 9,487 | 4,376 | 1.08% | +14% |
| Shriram Finance | 2,43,700 | 5,614 | 2,139 | 5.48% | +18% |
| Muthoot Finance | 1,02,000 | 3,248 | 1,531 | 2.40% | +26% |
| Cholamandalam Finance | 1,78,000 | 3,912 | 1,098 | 3.12% | +22% |
Set against that, Shriram Finance posted net profit of Rs 2,139 crore, up 18% year-on-year. Muthoot Finance reported Rs 1,531 crore, up 26%. Both are secured lenders — Shriram in used commercial vehicles, Muthoot in gold — and both are benefiting from conditions that are making unsecured lenders nervous. Cholamandalam Investment and Finance, which lends primarily for used vehicle and home equity purchases, grew profit 22% to Rs 1,098 crore.
The common thread in the performing names is collateral. Shriram’s gross NPA ratio fell to 5.48% from 5.74% in Q1 FY26, meaning its headline NPA number — still elevated by unsecured lender standards — is actually improving. The underlying portfolio of used trucks, buses, and tractors benefits from India’s sustained freight-traffic growth. Shriram’s network of 3,100 branches across smaller cities gives it pricing power that urban-digital competitors cannot easily replicate.
Muthoot’s dynamic is more unusual. Gold prices in India averaged Rs 73,500 per 10 grams in Q1 FY27, up from Rs 63,800 a year earlier — a 15% increase in collateral value. That improvement in underlying asset prices has a direct effect on loan-to-value ratios for gold lending: a borrower who pledged gold at 75% LTV in Q1 FY26 now has effective LTV closer to 65% at current prices, meaning Muthoot’s collateral coverage has widened even as it extended more credit. AUM grew 32% to Rs 1,02,000 crore, and gross NPA fell to 2.4% from 2.9% — one of the few sectors in Indian financial services where asset quality improved while book growth accelerated.
India’s banking sector posted its best credit cycle in a decade in Q1 FY27, with SBI and HDFC Bank both reporting declining gross NPAs. The NBFC sector’s Q1 numbers carry a more differentiated message: the cycle is good for secured credit, and the jury is still deliberating on unsecured.
For Bajaj Finance specifically, the stress is concentrated in two segments: B2C unsecured personal loans and the consumer durable financing book originated through retail electronics outlets. Both expanded rapidly in FY25 and FY26, with Bajaj leveraging its 90 million customer base to push pre-approved credit limits through its mobile app. The origination machine worked. The repayment machine has been slightly less reliable, particularly among borrowers who were new-to-credit or accessed credit across multiple lenders simultaneously.
The Reserve Bank of India raised risk weights on consumer credit loans from banks and NBFCs to 125% in November 2024, a step designed to slow unsecured lending growth without an outright restriction. The policy took roughly two quarters to filter through credit costs. Bajaj’s Q1 FY27 results are, in part, the consequence: the company tightened underwriting in response to the higher capital cost, booked fewer new unsecured loans in the quarter, and is still absorbing delinquencies from the cohort originated before the risk-weight change.
Management guided on the Q1 FY27 earnings call that credit costs should moderate toward 1.75% to 1.85% annualised by Q3 FY27. Net interest income grew 24% to Rs 9,487 crore, and the company added 1.9 crore new customers to its ecosystem in the quarter, a figure that signals the franchise continues to expand even as the unit economics of individual loans tighten. Whether those new customer relationships translate into cross-sell revenue faster than the legacy delinquency pool matures is the question Bajaj’s management has been asked to answer on each of the last three earnings calls. It has not been answered yet.
India’s banking sector’s record credit cycle did not distribute equally to its adjacent NBFC sector. The Rs 70 lakh crore NBFC industry that RBI now governs under a scale-based regulation framework — Tier I through Tier IV, with Bajaj Finance and Shriram Finance among the Tier IV systemically important entities — reported aggregate AUM growth of roughly 19% for Q1 FY27. But aggregate profit growth ran closer to 16%, a gap that reflects the asymmetric pressure between what secured lenders are earning and what unsecured lenders are provisioning.
The number that Q1 FY27 does not resolve is the trajectory. Bajaj Finance’s gross NPA at 1.08% remains low by historical standards and well below the levels at which the book becomes structurally impaired. Muthoot’s gold loan NPA at 2.4% is declining. Shriram’s NPA at 5.48% is improving. The question the next two quarters will answer is whether the unsecured stress at Bajaj stabilises at current levels or continues to drift higher as the FY25-FY26 cohort of new-to-credit borrowers ages through its loan tenures.
