RBI concluded that the charge of non-compliance with the directions was substantiated and warranted imposition of monetary penalty.
The Reserve Bank of India (RBI) on Tuesday imposed a monetary penalty of Rs 2.50 crore on Bajaj Finance for using coercive methods of recovery from its borrowers, and violation of general guidelines and one specific direction issued by the regulator. The central bank held the consumer financier guilty of violating directions on managing risks and code of conduct in outsourcing of financial services by non-banking financial companies (NBFCs) and the fair practices code (FPC) for applicable NBFCs. In addition, Bajaj Finance was also found to have violated a specific direction to ensure full compliance with FPC in letter and spirit.
“This penalty has been imposed in exercise of powers vested in RBI under the provisions of clause (b) of sub-section (1) of section 58 G read with clause (aa) of sub-section (5) of section 58B of the Reserve Bank of India Act, 1934, 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,” the regulator said in a statement on its website. There were also persistent and repeated complaints about recovery and collection methods adopted by Bajaj Finance, the RBI said.
For the above lapses, a notice was issued to the company advising it to show cause as to why a 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, the RBI concluded that the charge of non-compliance with the directions was substantiated and warranted imposition of monetary penalty. “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,” the regulator said.