The Reserve Bank of India (RBI) on Wednesday ordered Bajaj Finance Ltd to stop sanction and disbursal of loans under two lending products with immediate effect, due to deficiencies in adhering to digital lending guidelines.

RBI directed Bajaj Finance to stop sanction and disbursal of loans under its two lending products ‘eCOM’ & ‘Insta EMI Card’.

Bajaj Finance did not issue key information to borrowers under the eCOM and Insta EMI Card lending products, which offer small ticket consumer finance, RBI said in a statement.

The restrictions will be reviewed after the company rectifies the deficiencies, the RBI added.

RBI said it took the action by exercising its powers under section 45L(1)(b) of the Reserve Bank of India Act, 1934.

“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. These supervisory restrictions will be reviewed upon the rectification of the said deficiencies to the satisfaction of RBI,” said the central bank in a statement.

On Wednesday, Bajaj Finance’s scrip on BSE closed trading nearly 2% lower at Rs 7,217.

The Insta EMI card offers consumers pre-approved credit up to Rs 2 lakh for small ticket purchases, according to Bajaj Finance’s website. However, no description is available for the eCOM product on the website.

The NBFC had total assets under management of Rs 2.14 lakh crore as of Sept. 30, 2023, according to an investor presentation.

It had 41.9 million EMI cards outstanding, the presentation stated

RBI’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.

With inputs from Reuters