RBI orders Bajaj Finance to stop lending via eCOM, Insta EMI Card

The Reserve Bank of India has asked Bajaj Finance to stop the sanction and disbursal of loans under two lending products: eCOM and Insta EMI Card, with immediate effect.

This is due to non-adherence by the NBFC to the RBI’s digital lending guidelines, particularly the non-issuance of Key Fact Statements (KFS) 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.

• Also read: Bajaj Finance Q2 profit up 28 per cent to ₹3,551 crore on strong loan growth

The action has been taken under Section 45L(1)(b) of the Reserve Bank of India Act, 1934, which gives RBI the power to direct regulated entities (REs) pertaining to their conduct of business as a financial institution if it believes that such action is necessary to help it regulate the credit system of the country.

“These supervisory restrictions will be reviewed upon the rectification of the said deficiencies to the satisfaction of the RBI,” the central bank said.

Digital Lending norms

The RBI introduced the Digital Lending norms in September 2022, aimed at curbing the unscrupulous growth in instant digital personal loans and strengthening customer and data protection.

One of the key requirements of the framework was for regulated lenders to issue a ‘key fact statement’ to borrowers before execution of the loan in a standardised format. In addition to the necessary information, the statement needs to detail the APR (annual percentage rate), the recovery mechanism, details of a grievance redressal officer designated specifically for digital lending, and details of the applicable cooling-off or ‘look-up’ period.

• Also read: Bajaj Finance to raise up to ₹10,000 crore via QIP, preferential issue

“Any fees, charges, etc., 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,” the norms said.

As of September 2023, Bajaj Finance had over 4.2 crore EMI cards in force, 22 per cent higher on year. It acquired 6.8 lakh EMI cards digitally during Q2 FY24. The Insta EMI card allows users to make purchases of up to ₹2 lakh at zero cost across both online and offline stores, with a repayment tenure of up to 60 months.

Last week, Bajaj Finance raised around ₹8,800 crore through the largest QIP by an NBFC in India. It issued over 1.21 crore shares at ₹7,270 per share to sovereign wealth funds, foreign long-only funds, large domestic mutual funds, and insurance companies.

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