Synopsis
The RBI’s actions against Bajaj Finance and Paytm Payments Bank underscore its commitment to enforcing digital lending guidelines and maintaining regulatory compliance within India’s evolving digital finance landscape.
NEW DELHI: In a significant regulatory move, the Reserve Bank of India (RBI) ordered Bajaj Finance to cease sanctioning and disbursing loans under its ‘eCOM’ and ‘Insta EMI Card’ programs, citing non-compliance with digital lending guidelines.
RBI’s Directive and Reasons
Immediate Suspension of Lending Products
On Wednesday, the RBI mandated an immediate halt to Bajaj Finance’s two digital lending products. The central bank’s statement indicated that the suspension was due to Bajaj Finance’s failure to adhere to the RBI’s digital lending guidelines, particularly regarding the non-issuance of Key Fact Statements to borrowers and deficiencies in these statements for other digital loans sanctioned by the company.
Impact on Bajaj Finance’s Stock
Following this announcement, Bajaj Finance’s shares experienced a downturn, falling 1.84% to Rs 7,223.95 on the Bombay Stock Exchange (BSE).
Supervisory Restrictions and Future Review
The RBI clarified that these supervisory restrictions would be subject to review upon the rectification of the highlighted deficiencies to the RBI’s satisfaction.
Context: RBI’s Increasing Scrutiny on Digital Lending
Recent Penalty on Paytm Payments Bank
Last month, the RBI imposed a penalty of Rs 5.39 crore on Paytm Payments Bank Ltd for non-compliance with various provisions, including Know Your Customer (KYC) norms, guidelines for licensing of payments banks, cybersecurity framework, and securing mobile banking applications.
Special Scrutiny and System Audit
A special scrutiny from the KYC/Anti-Money Laundering (AML) perspective was conducted on Paytm Payments Bank, accompanied by a comprehensive system audit by auditors identified by the RBI.
Findings and Violations
The RBI’s examination revealed that Paytm Payments Bank failed in identifying beneficial owners for entities onboarded for payout services. It also did not adequately monitor payout transactions or conduct risk profiling for entities using payout services. Furthermore, the bank exceeded the regulatory ceiling for end-of-day balances in some customer advance accounts availing payout services.
(India CSR – India CSR Largest CSR Media in India)
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