RBI imposes Rs 2.5 crore monetary penalty on Bajaj Finance

The Reserve Bank of India (RBI) on late Tuesday evening imposed a monetary penalty of Rs 2.5 crore on Bajaj Finance Limited for harassment and intimidation of customers by recovery agents during debt collection.

"This penalty has been imposed in exercise of powers vested in RBI under the provisions of clauses 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. There were also persistent/repeat complaints about recovery and collection methods adopted by the company," RBI's note said.

Bajaj Finance, the largest NBFC in the consumer finance segment, was pulled out for violating directions issued by RBI on:

• Managing Risks and Code of Conduct in Outsourcing of Financial Services by NBFCs;
• Fair Practices Code (FPC) for applicable NBFCs

Before imposing this penalty, the regulator had issued a show cause notice to Bajaj Finance, advising it to explain its stance over the non-compliance. However, after considering the reply to the notice, oral submissions made during the personal hearing and examination of additional submissions made by the company, RBI concluded that the charge of non-compliance 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, notified the regulator.