The terms in clauses used by two of the group's business arms, Delphi Bank and Rural Bank, gave them too much power to change terms and conditions without advanced notice, the court has found.

An investigation by the financial watchdog ASIC found small businesses did not have the opportunity to exit the contracts without penalty if the bank changed those terms and conditions.

Other terms allowed the bank to take "disproportionate" actions in response to breaches by the group borrowing the money, ASIC found.

The bank had the power to call a default without giving the borrower an opportunity to remedy a breach, or because of events that did not present it with any material risk.

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ASIC did not believe the bank had relied on any of the terms in a manner that was unfair or caused customers loss or damage.

The watchdog and the Bendigo Bank approached the court together to have the terms changed.

In a statement, the Bendigo Bank noted it had agreed in June 2018 to change the terms in question.

It will give the same undertaking to the court.

"We remain committed to keeping our customers at the centre of everything we do and ensuring we satisfy all regulatory requirements and guidelines," the bank said.

ASIC commissioner Sean Hughes welcomed the court's ruling and issued a warning to other groups issuing contracts, singling out those that offer insurance contracts.

"ASIC is committed to protect small business owners of Australia from unfair terms in loan contracts, particularly where business borrowers are confronted with inflexible standard terms," he said.

"We are pleased the Government backed us with additional funding that was earmarked to enforce this area of the law."

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