India cenbank stops Bajaj Finance from issuing loans under two products

BENGALURU (Reuters) -India’s central bank on Wednesday barred Bajaj Finance, one of India’s largest consumer lenders, from issuing loans under two products with immediate effect, due to deficiencies in adhering to digital lending guidelines.

Bajaj Finance did not issue key information to borrowers under the eCOM and Insta EMI Card lending products, the Reserve Bank of India (RBI) said in a statement.

There were deficiencies in information for other digital loans and the restrictions imposed will be reviewed after Bajaj Finance rectifies these deficiencies, the RBI said.

Bajaj Finance said it is temporarily suspending the sanction and disbursal of new loans under eCOM and Insta EMI Card and added the firm will rectify the key fact statement for eCOM and Insta EMI Card at the soonest.

The RBI restrictions on lending via the two products will not have a material financial impact on the company, Bajaj Finance added.

The Insta EMI card offers consumers pre-approved credit up to 200,000 rupees (about $2,400) for small ticket purchases, according to Bajaj Finance’s website. No description is available for the eCOM product on the website.

The non-bank lender had total assets under management of 2.14 trillion rupees ($25.76 billion) as of Sept. 30, 2023, according to an investor presentation.

It had 41.9 million EMI cards outstanding, the presentation said.

The central bank’s digital lending guidelines, enforced last year, require that a lender disclose all fees and charges to borrowers upfront and also detail its recovery practices in the event of a default.

The guidelines were introduced after complaints of unfair digital lending practices, including inadequate information on charges associated with digital loans.

This is the first time that the RBI has used these rules to restrict a large player from adding customers, said Srinath Sridharan, an independent policy researcher.

“These supervisory actions do well in assuring the consumers of their rights,” Sridharan said.

Bajaj Finance shares closed 1.9% lower on the day. The RBI’s restrictions were announced after the market had closed. ($1 = 83.0752 Indian rupees)

(Reporting by Nishit Navin, Chris Thomas and Ira Dugal; Additional Reporting by Rishabh Jaiswal; Editing by Varun H K, Savio D’Souza and Shounak Dasgupta)