Ban on Bajaj Finance products: What it means
RBI) has barred Bajaj Finance, India's largest consumer financier, from sanctioning and disbursing loans under two of its lending products — 'eCOM' and 'Insta EMI Card' citing non-issuance of key fact statements (KFS) to the borrowers under these two lending products, and deficiencies in the KFS for other digital loans of the company.
What is a KFS?
A KFS is a document detailing vital information on a loan like amount, tenure, interest rate, fees and penalties. RBI rules mandate that digital loan customers are given these details in a easy-to-read concise format.
These are a part of the RBI's digital lending guidelines and were not provided for the customers of Bajaj Finance.
What could be the impact of this ban on Bajaj Finance?
Analyst estimates are mixed. A Macquarie report citing the company's investor presentation said out of the 3,580,000 customers added in the second quarter about 670,000 or 19% were EMI card customers.
Digitally-sourced EMI card franchise stood at 4,200,000 or 10% of the EMI card base.
However, Jefferies expects a limited financial impact on the company as it estimates the insta EMI Card base at 4,000,000 or 5% of total clients, that is 0.2% of disbursals, which is less than 1% of fees and less than 0.5% of profit.
What has the company said?
Bajaj Finance said it does not expect the RBI action to have a material financial impact on the company.
The company will rectify observations of the RBI in KFS and comply with RBI directions at the earliest. It is reviewing the KFS for the loans booked under the two lending products, based on the concerns raised by the RBI and implement requisite corrective actions.
What does it mean in the digital age? Could rivals get an advantage?
The RBI action
