(Reuters) -India's Bajaj Finance on Monday trimmed its growth forecast for asset under management (AUM) for the 2025-26 financial year, citing rising bad loans in its micro, small and medium enterprises (MSME) segment and strong competition in the mortgage lending business.

The non-banking finance company now expects consolidated AUM to grow 22-23% in the current fiscal year, down from an earlier estimate of 24-25%, after posting 26% growth a year earlier.

"The company has taken a prudent and balanced stand on the AUM growth guidance," Vice Chairman and Managing Director Rajeev Jain said.

The revision reflects risk actions taken in MSME lending and a cut in forecast by its housing finance unit, Jain added.

"Credit cost remained elevated in captive two- and three-wheeler and MSME businesses," the company said, adding that it had reduced unsecured MSME loan volumes by 25%.

It now expects AUM from MSME lending to grow 10-12% in FY26, compared with 18% growth as of end-September from a year earlier.

In July, Bajaj Housing Finance, its mortgage-lending arm, also forecast slower growth, projecting AUM to rise 21-23% in FY25 versus 26% last year, as competition and muted demand weigh on expansion.

Earlier on Monday, Bajaj Finance reported a 22% rise in quarterly net profit to 48.76 billion rupees for the three months ended September 30, driven by strong loan growth even as asset quality weakened.

AUM grew 24% year-on-year, while new loan bookings increased 26%. Net interest income rose 22% to 107.85 billion rupees. The lender's gross non-performing asset ratio climbed to 1.24% from 1.03% in the previous quarter.

Separately, the company said it had elevated Manish Jain to the role of deputy CEO.

($1 = 87.8950 Indian rupees)

(Reporting by Nishit Navin; Editing by Ronojoy Mazumdar and Anil D'Silva)

By Nishit Navin