The action stems from a failure to comply with the current provisions of the Reserve Bank of India’s guidelines for digital lending.
On November 15, Bajaj Finance received a request from the Reserve Bank of India (RBI) to immediately cease the approval and disbursement of loans under its two lending products.
The central bank released a news statement identifying these products as “eCOM” and Insta EMI Card.
The action stems from a failure to comply with the current provisions of the Reserve Bank of India’s guidelines for digital lending, specifically the failure to provide Key Fact Statements to borrowers under these two lending products and the inadequacies in the KFSs provided for other digital loans approved by the business.
The central bank went on to state that these supervisory limitations will be reevaluated once the aforementioned shortcomings have been fixed to RBI’s satisfaction.
The following was released by Bajaj Finance in reaction to the RBI’s action:
“Bajaj finance would want to suggest recommend creating “KFS” or Key Fact Statements, to back the loans planned under the two lending products mentioned above. However, Bajaj finance will conduct a thorough examination of the KFS and carry out the necessary corrective activities as soon as possible to the satisfaction of the RBI, in light of the supervisory concerns expressed by the RBI. In the interim, the Company is acting as instructed by the RBI and is doing the following:
1. Putting a temporary stop to the approval and distribution of new loans under “eCOM; and
2. Temporarily stopping the approval and disbursement of new loans via the “Insta EMI Card” online or digitally.
Bajaj finance reiterate our resolve to address the RBI’s remarks in the Key Fact Statement and to follow its instructions as soon as possible. We also want to keep working to ensure that our clients receive smooth financial services.”
The RBI on August 10, 2022 released a list of norms to regulate digital lending to protect borrowers and crack down on the growing number of frauds and unlawful activities within the sector.
A working committee was established by the RBI in January 2021 to investigate concerns related to digital lending and recommend legislation. The panel suggested more stringent guidelines for digital lenders in November 2021; some of them have been approved and others are being considered.
Stakeholders and industry experts had long expected and anticipated the norms. Particularly after the COVID-19 outbreak, instant loan companies proliferated, luring unsuspecting customers with promises of simple loans just to bother them later on with collection agents.