Business & Economy

RBI Takes Action Against Bajaj Finance: Loan Stopped Over Digital Lending Guidelines neglected

On November 15, 2023, the Reserve Bank of India (RBI) took a decisive step by instructing Bajaj Finance to immediately halt the approval and disbursement of loans under its two lending products – eCOM and Insta EMI Card. This directive, as outlined in an official press release from the central bank, was prompted by Bajaj Finance’s non-compliance with the existing provisions of the Digital Lending Guidelines set forth by the RBI. Specifically, the company was found to be in violation due to the non-issuance of Key Fact Statements (KFS) to borrowers under these two lending products. Moreover, deficiencies were identified in the KFS related to other digital loans sanctioned by Bajaj Finance.

The RBI clarified that these supervisory restrictions would be subject to review once the identified deficiencies were rectified to the satisfaction of the RBI. In response to this regulatory action, Bajaj Finance issued a statement acknowledging the supervisory concerns raised by the RBI. The company asserted that KFS were indeed being issued for loans booked under the mentioned lending products. However, in light of the RBI’s concerns, Bajaj Finance committed to conducting a comprehensive review of the KFS and implementing necessary corrective actions promptly. As an interim measure, the company announced the temporary suspension of the approval and disbursement of new loans under both eCOM and Insta EMI Card, in accordance with the RBI’s directives. Bajaj Finance expressed its dedication to addressing the RBI’s observations and complying with the regulatory directions expeditiously, while emphasizing its ongoing commitment to providing seamless financial services to its customers.

This regulatory intervention by the RBI aligns with its broader efforts to regulate digital lending effectively. On August 10, 2022, the RBI had unveiled a set of norms aimed at safeguarding borrowers and curbing fraudulent and unlawful activities within the digital lending sector. In January 2021, the RBI had established a working group to examine issues related to digital lending and propose regulatory measures. By November 2021, the working group had recommended stricter norms for digital lenders, some of which were accepted, and others were still under examination. The release of these norms was eagerly anticipated by stakeholders and industry experts, especially given the proliferation of instant loan providers, particularly in the aftermath of the COVID-19 pandemic. Such entities often attract unsuspecting consumers seeking easy loans but subsequently engage in harassment through recovery agents. The RBI’s intervention with Bajaj Finance reflects a broader regulatory initiative to ensure the integrity and consumer protection within the digital lending landscape, with a focus on enforcing compliance with established guidelines and norms.

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