India’s central bank plans to restrict non-bank lenders from offering revolving credit and flexi loans, prompting market jitters and potential product redesigns among major firms like Bajaj Finance amid a broader crackdown on digital lending practices.
India’s central bank has proposed tightening rules on non-bank lenders by barring them from offering revolving credit products such as credit-card-like lines and flexi loans, a move that could force firms including Bajaj Finance to redesign popular lending products. According to the original report, the Reserve Bank of India wants to limit NBFCs to fixed-term loans, while allowing only those firms expressly authorised to issue credit cards to continue doing so.
The proposal rattled investors on Friday, with Bajaj Finance shares falling 5.84% to ₹1,078 and L&T Finance also slipping, as the market weighed the possible impact on digital lending models built around reusable credit. The article said customers who have relied on flexible borrowing could be pushed towards new term loans or bank-issued credit cards instead.
The shift comes against a backdrop of tougher scrutiny of lending practices at India’s non-bank finance sector. In December 2023, the RBI restricted Bajaj Finance’s “eCOM” and “Insta EMI Card” products over digital lending rule breaches, including problems linked to the Key Fact Statement requirement, according to a report by Way2Wealth. CareEdge has also noted that the RBI has recently been adjusting NBFC rules in other areas, including capital treatment for infrastructure finance, underscoring a broader push to refine the sector’s risk management framework.
If adopted, the latest proposal would cut across some of the fastest-growing consumer credit products in India, especially “Credit Line” and “Flexi Loan” offerings that allow repeated borrowing against the same limit. The central bank’s aim, according to the report, is to curb uncontrolled retail lending and make the credit system more transparent and robust.
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