Bajaj Finance is to stop disbursing loans using two of its lending offerings, the “Insta EMI Card” and “eCOM,” on an order from the RBI of India (RBI). This action is being taken in accordance with Reserve Bank of India Act, 1934, section 45L(1)(b). It is effective immediately. The central bank justified this regulatory action primarily on the grounds of “non-adherence” to its rules for digital lending.
RBI’s Justification for the Directive
The reason for the RBI’s decision is that it believes Bajaj Finance has not complied with the requirements for digital lending. Supervisory concerns were raised by the the lack of Key Fact Statements (KFS) to borrowers under the aforesaid lending products and by flaws in the KFS for other digital loans that the corporation sanctioned.
Immediate Compliance Required at Bajaj Finance
Bajaj Finance is required to follow the RBI’s instruction right away. Following the completion of the identified flaws to the satisfaction of the RBI, the regulatory limits pertaining to the two lending products will be reviewed. This places the onus on Bajaj Finance to address the issues promptly and ensure adherence to the digital lending guidelines.
Context and Regulatory Framework
The RBI took this action as part of its continuous efforts to control the online lending market and protect borrowers’ interests. In August of the preceding year, the central bank released guidelines for digital lending with the goal of preventing fraud and guaranteeing moral behavior in the digital lending industry. For banks and non-banking financial organizations (NBFCs) involved in digital lending, adherence to these regulations is crucial.
While Bajaj Finance maneuvers around this regulatory direction, the focus is on how quickly the found shortcomings can be fixed. The emphasis placed by the central bank on following the standards for digital lending highlights the larger regulatory framework designed to promote transparency and safeguard borrowers in the rapidly changing field of digital finance.
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