The Reserve Bank of India (RBI) on November 15 asked Bajaj Finance to stop sanction and disbursal of loans under its two lending products with immediate effect.
These products are eCOM and Insta EMI Card, according to a press release from the central bank.
The action is on account of non adherence to the extant provisions of Digital lending guidelines of Reserve Bank of India, particularly 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.
The central bank further said that these supervisory restrictions will be reviewed upon the rectification of the said deficiencies to the satisfaction of RBI.
In response to the RBI's action, Bajaj Finance issued the following statement:
"We wish to submit that Key Fact Statement (‘KFS’) are being issued for the loans booked under the above mentioned two lending products. However, based on the supervisory concerns raised by the RBI, we will undertake a detailed review of the KFS and implement requisite corrective actions to the satisfaction of the RBI at the earliest. Pending the same, as directed
by the RBI, the Company is taking following actions:
1. Temporarily suspending sanction and disbursal of new loans under ‘eCOM; and
2. Temporarily suspending sanction and disbursal of new loans online/digitally on ‘Insta
EMI Card’.
We re-affirm our commitment to rectify observations of the RBI in Key Fact Statement and comply with RBI Directions at the earliest, and will continue with our endeavor to provide seamless financial services to our customers."
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.
The RBI in January 2021 set up a working group to study issues regarding digital lending and suggest regulations. In November 2021, the group proposed stricter norms for digital lenders, some of which have been accepted and others are under examination.
The norms were overdue and anticipated by stakeholders and industry experts. Instant loan providers mushroomed, especially after the COVID-19 pandemic, and lure gullible consumers looking for easy loans only to harass those later using recovery agents.
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