In a fresh regulatory development, the Reserve Bank of India (RBI) has expressed strong discontent over Bajaj Finance’s handling of its co-branded credit card business, citing critical lapses in data security and operational controls.
According to reports by CNBC Awaaz, the banking regulator has issued a ‘letter of displeasure’ to the non-banking financial company (NBFC), raising concerns over its failure to proactively identify risks and prevent fraudulent activities.
The RBI’s latest communication refers to an earlier letter sent on January 31, to which Bajaj Finance had responded on February 22. However, the regulator noted that the NBFC had not taken adequate measures to bridge operational gaps and mitigate risks effectively.
The central bank criticized Bajaj Finance for its lack of robust internal controls, which have allegedly exposed customers to significant security threats.
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Furthermore, the letter underscored the need for Bajaj Finance to enhance its compliance framework, particularly in the selection of external auditors to ensure there are no conflicts of interest. The RBI has also directed the company to bolster its IT and cybersecurity infrastructure to safeguard customer data and prevent leaks.
Following the news, Bajaj Finance’s shares witnessed a sharp decline, trading nearly 2% lower in early trade on April 3. The latest setback comes after the RBI had previously imposed restrictions on the NBFC in 2023 due to its failure to adhere to digital lending guidelines.
While the curbs were lifted in May 2024—allowing Bajaj Finance to resume sanctioning and disbursing loans for products like eCOM and online digital ‘Insta EMI Card’—the new regulatory rebuke signals lingering compliance concerns.
Adding to the turbulence, Bajaj Finance and RBL Bank had officially ended their co-branded credit card partnership in November last year. The dissolution of this partnership had already raised questions about the company’s ability to manage its credit card business effectively, and the latest regulatory reprimand further intensifies scrutiny on its governance and risk management practices.
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In a broader context, RBI Governor Sanjay Malhotra has recently urged NBFCs to play a more significant role in financial inclusion while ensuring robust customer protection mechanisms. The concerns raised in the letter to Bajaj Finance reflect the regulator’s firm stance on enforcing compliance and safeguarding consumers from data breaches and fraudulent financial activities.