The shares of Bajaj Finance have seen a drop following the Reserve Bank of India's orders on 2 lending products. In Thursday's trade, the shares of Bajaj Finance Ltd dropped 4 percent. The key reasons behind this drop are the orders by the apex bank that demand the company to cease disbursing loans under "eCOM" and Insta EMI Card", two of the company's lending products, with immediate effect.
What were the exact orders by RBI, and what was the rationale behind such orders?
Here we elucidate every bit of the story for you.
The RBI's orders
Everything started on November 15, when the Reserve Bank of India 9RBI) instructed Bajaj Finance Ltd. to stop disbursal and sanction of loans under two of its lending products, Insta EMI Card and eCOM, immediately. This has been expressed through a press release issued on Wednesday.
Followed by this move, a statement was issued by the company which expressed that Bajaj Finance re-affirms the commitment to look into the observations of the central bank in the Key Fact Statement and abide by the directions of RBI as soon as possible.
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The reasons behind RBI barring two lending products of RBI
On November 15, the RBI stated that Bajaj Finance could not comply with the Digital Lending guidelines of the Reserve Bank of India. Bajaj Finance did not issue the Key Fact Statements to borrowers under the two lending products.
Not to miss, there have been some other discrepancies or deficiencies as well in the Key Fact Statements issued under other digital loans sanctioned by Bajaj Finance.
The RBI regulations on Key Fact Statements
What exactly is a Key Fact Statement? Well, a Key Fact Statement is a statement that comprises loan-related data like the recovery mechanisms, annualized percentage rate, information of the grievance redressal officer, insurance charges, number of installments, cooling-off period, amount to be paid by borrowers, disbursed amount, and more.
The regulations of the RBI on digital lending make it a mandate for such lenders to give a Key Fact Statement to their borrowers.
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The response of Bajaj Finance
Bajaj Finance expressed that the Key Fact Statement is actually being issued for the loans that are booked under the two lending products, Insta EMI Card and eCOM.
“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,” expressed Bajaj Finance.
The company further stated that it is going to temporarily suspend the disbursal and sanction of new loans under Insta EMI Card and eCOM.
Digital lending guidelines by RBI
It was in the last year that the RBI issued the Digital Lending guidelines and then increased the application scope to all commercial banks, Non-Banking Financial Companies, District Central Co-operatives Banks, Primary Co-operative Banks, and State Co-operative Banks.
The circular comprises of instructions that are applicable to not only to the new customers but also to the existing customers eager to avail of fresh loans.
Insta EMI Cards and eCOM
The Insta EMI Cards enable Bajaj Finance customers to purchase products at no cost EMIs. According to the website of the company, the customers receive a preapproved loan limit of Rs 2 lacs that the customers can make use of at 1.5 lac offline and online partner stores, across 4,000 cities.
According to a report, the company issues over seven lac digital EMI cards on a quarterly basis.
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