New Delhi: The Reserve Bank of India (RBI) has imposed a ban on Bajaj Finance, one of the leading non-banking financial companies (NBFCs) in the country, from sanctioning and disbursing loans under its two digital lending products, namely eCOM and Insta EMI Card, with immediate effect. The RBI said that the action was taken due to Bajaj Finance’s non-compliance with the RBI’s guidelines on digital lending, especially the non-disclosure of key facts to the customers under these two products and other digital loans approved by the company.
The RBI issued a statement on Wednesday, saying that “The Company is not complying with the extant provisions of the Digital Loan Guidelines of the Reserve Bank of India, particularly the non-disclosure of key facts to the customers under these two loan products and other digital loans approved by the Company.” The RBI added that the restrictions will be reviewed after the company rectifies the deficiencies and satisfies the RBI.
According to the RBI’s guidelines on digital lending, which were issued in September 2022, regulated entities (REs) such as banks and NBFCs are required to disclose key facts to the customers, such as the name of the RE, the annual percentage rate (APR), the cooling off/look-up period, the grievance redressal mechanism, and the terms and conditions of the loan agreement, among others. The guidelines also mandate that the REs should ensure that the lending service providers (LSPs) and the digital lending apps (DLAs) engaged by them comply with the guidelines.
The eCOM and Insta EMI Card products offered by Bajaj Finance are digital lending products that allow customers to shop online on various e-commerce platforms using no-cost EMIs. The customers can avail loans up to Rs. 2 lakh and repay them over a flexible tenure of up to 60 months. However, the RBI found that Bajaj Finance did not disclose the key facts to the customers under these products and other digital loans, which could lead to unfair and deceptive practices and harm the interests of the customers.
The RBI’s action against Bajaj Finance had a negative impact on the company’s share price, which fell by about 2 percent and closed at Rs. 7,224.30 with a fall of Rs. 136.55 on Wednesday. Bajaj Finance is one of the largest players in the digital lending space, with a customer base of over 5 crores and a loan book of over Rs. 1.7 lakh crore as of September 2022. The company has not yet issued any official response to the RBI’s order.