The Reserve Bank of India (RBI) on Tuesday imposed a fine on a non-bank financier Bajaj Finance ₹2.5 crore for failing to ensure that its debt collectors do not harass borrowers under the guise of debt collection.
The Non-Banking Financial Company (NBFC) reported assets under management (AUM) of ₹1.04 trillion as of September 30, 2020.
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The move takes on significance at a time when there have been dozens of customer complaints against clawback practices followed by some app-based lenders that border on harassment. While most of these entities are unregulated by the central bank, its ruling on a regulated entity like Bajaj Finance should make others cautious as well, acting as a deterrent. the problems of regulating these applications are numerous. A large portion of these lending applications are not registered as non-bank financial companies (NBFCs), but under the money lending laws of various state governments, complicating a regulatory response.
“This sanction has been imposed in the exercise of the powers granted to RBI under the provisions of subparagraph (b) of subsection (1) of Article 58 G read together with subparagraph (aa) of the subsection (5) of Section 58B of the Reserve Bank of India Act, 1934, taking into account that the company failed to ensure that its debt collectors did not resort to harassment or bullying customers as part of its debt collection efforts and therefore failed to comply with the aforementioned instructions issued by RBI,” it said.
RBI added that there were repeated complaints about the recovery and collection methods adopted by the company. According to RBI, a notice was issued to the company advising it to justify why a penalty should not be imposed for such non-compliance.
“After reviewing the company’s response to the notice, the oral submissions made at the personal hearing, and considering the additional submissions it made, RBI has concluded that the charge of breach of instructions RBI’s aforementioned claims were well-founded and warranted the imposition of a monetary penalty,” it said.