Bajaj Finance seeks $500 million offshore loan amid tougher domestic regulations

Bajaj Finance Ltdthe largest in India non-banking financial company (NBFC) in market value, is in talks to secure up to $500 million through an offshore loan, according to sources familiar with the matter. The move comes after tougher regulations imposed by Reserve Bank of India (RBI)This has limited domestic lending opportunities for shadow finance entities, prompting many of them to turn to global credit markets.

The Pune-based NBFC is reportedly negotiating terms for the loan with a consortium of at least four foreign banks. The loan is expected to have a tenure of three to five years and the price will be linked to Secured Overnight Financing Rate (SOFR)a widely used benchmark in Asia. The funds will be raised through the RBI’s (ECB’s) external commercial borrowing facility, which caps the interest rate at 500 basis points above the benchmark rate.

The decision to seek offshore funding comes as local shadow lenders face increased pressure following an RBI directive directing banks to raise capital buffers for consumer loans, aimed at curbing risky lending practices. The regulatory change has made it harder for NBFCs to access traditional bank loans, forcing them to turn to international credit markets for funding.

Bajaj Finance, a unit of one of India’s oldest conglomerates, Bajaj Group, primarily provides loans for the purchase of two- and three-wheelers manufactured by its subsidiary Bajaj Auto Ltd., as well as consumer appliances. The company is also heavily involved in offering personal and mortgage loans.