The Reserve Bank of India (RBI) on Wednesday directed Bajaj Finance to stop lending through two products — eCOM and Insta EMI Card — with immediate effect.
The RBI said the action has been taken as the non-banking finance company (NBFC) did not meet its digital lending guidelines.
“This action is necessitated due to non-adherence of the company to the extant provisions of digital lending guidelines of the RBI, particularly non-issuance of Key Fact Statements (KFS) to the borrowers under these two lending products and the deficiencies in the KFS issued in respect of other digital loans sanctioned by the company,” the banking regulator said in a statement.
While the statement came after market hours, the Bajaj Finance stock was under pressure at the bourses on Wednesday and it slipped 1.84 per cent to close at Rs 7,223.95 on the BSE. The RBI said these supervisory restrictions will be reviewed after the rectification of the deficiencies to its satisfaction.
In September last year, the Reserve Bank issued guidelines on digital lending with an aim to protect the interest of borrowers.
The regulatory framework is focused on the digital lending ecosystem of RBI Regulated Entities (REs) and lending service providers (LSPs) engaged by them to extend various permissible credit facilitation services.
The guidelines had said that REs shall provide a KFS to the borrower before the execution of the contract in a standardised format for all digital lending products.
It added that the KFS shall, apart from other necessary information, contain the details of annual percentage rate, the recovery mechanism, details of grievance redressal officer designated specifically to deal with digital lending or fintech related matter and the cooling-off or the look-up period.
Any fees or charges which are not mentioned in the KFS cannot be charged by the REs to the borrower at any stage during the term of the loan.
While the quantum of lending under the two products could not be ascertained, a presentation made by the company after its second quarter results showed its EMI card franchise at 4.19 crore.
