The Reserve Bank of India (RBI) has taken action against four non-banking financial companies (NBFCs) — Asirvad Micro Finance Ltd, Arohan Financial Services Ltd, DMI Finance, and Navi Finserv — due to significant supervisory concerns.
The central bank has directed these entities to halt loan sanctions and disbursements starting from 21 October.
The RBI stated the action stems from issues with the “Pricing Policy of these companies in terms of their weighted average lending rate (WALR) and the interest spread charged over their cost of funds, which are found to be excessive and not in adherence with the regulations.”
These NBFCs were also found to be in breach of the Fair Practices Code, with the RBI highlighting "usurious pricing" and failures to comply with regulatory guidelines regarding the assessment of household income and consideration of borrowers’ repayment obligations for microfinance loans.
“Deviations were also observed in respect of Income Recognition & Asset Classification (IR&AC) norms resulting in evergreening of loans, the conduct of gold loan portfolio, mandated disclosure requirements on interest rates and fees, outsourcing of core financial services, etc.,” RBI said.
The RBI said that these restrictions, effective after close of business on 21 October 2024, aim to allow the closure of any ongoing transactions.
However, these NBFCs will still be allowed to service their existing customers and carry out collection and recovery processes in line with current regulations.
RBI said that the business restrictions may be reviewed after receiving confirmation from the companies that they have taken suitable remedial action to comply with regulatory guidelines, “more particularly their pricing policy, risk management processes, customer service and grievance redressal aspects, to the satisfaction of the Reserve Bank.”
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