RBI orders Bajaj Finance to stop disbursing some loans

The Reserve Bank of India on Wednesday ordered Bajaj Finance to stop sanction and disbursal of loans under its two lending products 'eCOM' and 'Insta EMI Card', with immediate effect.

"This action is necessitated due to non-adherence of the company to the extant provisions of digital lending guidelines of Reserve Bank of India, particularly non-issuance of Key Fact Statements 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," the banking regulator says in a statement.

"The Reserve Bank of India has today, in exercise of its powers under section 45L(1)(b) of the Reserve Bank of India Act, 1934, has directed Bajaj Finance Ltd. to stop sanction and disbursal of loans under its two lending products 'eCOM' and 'Insta EMI Card', with immediate effect," the central bank says.

These supervisory restrictions will be reviewed upon the rectification of the said deficiencies to the satisfaction of RBI, it adds.

Last month, the non-banking finance company reported a consolidated net profit of ₹3,551 crore for the quarter ended September, up 28% from ₹2,781 crore in the same period last year. The company's consolidated net interest income (NII) for Q2 FY24 increased 26% to ₹8,845 crore from ₹7,002 crore in the same quarter last year. Its assets under management (AUM) grew 33% or ₹20,167 crore to ₹2,90,264 crore as of September 30, 2023, from ₹2,18,366 crore as of September 30, 2022. The number of new loans booked during Q2 FY24 grew 26% to 8.53 million against 6.76 million in the year-ago period. Bajaj Finance’s customer base recorded 22% growth at 7.6 crore as of 30 September 2023 as compared to 6.2 crore as of September 30, 2022. Loan losses and provisions for Q2 FY24 were ₹1,077 crore against ₹734 crore in Q2 FY23. Gross NPA and net NPA as of Q2 FY23 stood at 0.91 % and 0.31%, respectively compared with 1.17% and 0.44% in the year-ago period.

Earlier in November, Bajaj Finance launched a Qualified Institutional Placement (QIP) to raise funds to ₹8,800 crore. The NBFC is set to launch its microfinance business. The tractor financing business will be launched in January 2024 and commercial vehicle lending by June 2025, managing director Rajeev Jain told Fortune India.

"We just launched a new car financing business. We will be launching microfinance in November, tractor financing in January next year and commercial vehicle lending by June 2025. That would complete what retail banking in India stands for," said Jain. With this, Bajaj Finance will have about 50 different lines of businesses. It added a non-captive two-wheeler financing business last year.