The Reserve Bank of India (RBI) has imposed a penalty of Rs 2.50 crore on Bajaj Finance for violation of codes governing the methods employed to recover dues amongst others. The RBI said that Bajaj Finance failed to ensure that its recovery agents were not harassing or using other intimidation tactics during recovery.
Accordingly, the company was found to be in violation of directions issued "on Managing Risks and Code of Conduct in Outsourcing of Financial Services by NBFCs and Fair Practices Code (FPC) for applicable NBFCs... and a specific direction to the company to ensure full compliance with FPC in letter and spirit,” said an RBI statement.
"This penalty has been imposed... taking into account the failure of the company to ensure that its recovery agents did not resort to harassment or intimidation of customers as part of its debt collection efforts and thereby failing to adhere to the aforesaid directions issued by RBI," it said.
The central bank noted that there were persistent or repeat complaints about recovery and collection methods adopted by the company.
"This action is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the company with its customers."
This comes at a time when digital loan apps have come under scanner for resorting to harassment to recover money lent and for privacy violations such as accessing contacts for the borrower and contacting them as part of recovery.
After the media reported more than 2-3 deaths by suicide due to harassment from these digital lending apps, the RBI on December 23, had cautioned against unauthorised Digital Lending Platforms/Mobile Apps.
“These reports also refer to excessive rates of interest and additional hidden charges being demanded from borrowers; adoption of unacceptable and high-handed recovery methods; and misuse of agreements to access data on the mobile phones of the borrowers,” RBI said at the time.
Noting that individuals and small businesses were falling prey to growing number of unauthorised digital lending platforms/Mobile Apps on promises of getting loans in quick and hassle-free manner, it cautioned the public to not to fall prey to such unscrupulous activities and verify all details of the company offering loans online or through mobile apps.
Prior to penalising Bajaj Finance, RBI said a notice was first issued to the company asking it to show cause as to why penalty should not be imposed for such non-compliance.
“After considering the company’s reply to the notice, oral submissions made during the personal hearing and examination of additional submissions made by it, RBI concluded that the charge of non-compliance with the aforesaid RBI directions was substantiated and warranted imposition of monetary penalty,” it said in a statement.
RBI also said in its December 23 notice that it has mandated that digital lending platforms which are used on behalf of Banks and NBFCs should disclose name of the Bank(s) or NBFC(s) upfront to the customer.
With IANS inputs