RBI stops Bajaj Finance from disbursing & sanctioning loans

By: Pune Pulse

November 16, 2023

Pune: Due to shortcomings in following digital lending guidelines, the Reserve Bank of India (RBI) on Wednesday prohibited Bajaj Finance, one of the country’s biggest consumer lenders, from issuing loans under two products. The ban is effective immediately.

As per information from a press release from RBI, the Reserve Bank of India has on Thursday, in exercise of its powers under section 45L(1)(b) of the Reserve Bank of India Act, 1934, has directed Bajaj Finance Ltd. (“the company”) to stop sanction and disbursal of loans under its two lending products ‘eCOM’ and ‘Insta EMI Card’, with immediate effect.

This action is necessitated due to the non-adherence of the company to the extant provisions of Digital lending guidelines of the Reserve Bank of India, particularly the non-issuance of key fact statements to the borrowers under these two lending products and the deficiencies in the key fact statements issued in respect of other digital loans sanctioned by the company. These supervisory restrictions will be reviewed upon the rectification of the said deficiencies to the satisfaction of RBI.

As of September 30, the non-bank lender had ₹2.14 trillion ($25.76 billion) in total assets under management. 41.9 million EMI cards were still outstanding.

The digital lending guidelines enforced by the central bank last year mandate that lenders provide borrowers with an upfront disclosure of all fees and charges, along with information about their recovery practices in the event of a default.

Following complaints of unfair digital lending practices, including a lack of adequate information regarding the costs associated with digital loans, the guidelines were introduced.

According to an independent policy researcher, the RBI has never before used these regulations to prevent a major player from growing its customer base.

Shreyas Vange