The Reserve Bank of India (RBI) on Thursday banned Asirvad Micro Finance, Arohan Financial Services, DMI Finance, and Navi Finserv from sanctioning and disburing loans due to pricing concerns. The business restrictions on these non-banking financial companies (NBFCs) apply with effect from October 21, 2024.
Navi was founded by Flipkart co-founder Sachin Bansal after he quit the e-commerce company, while Asirvad is a subsidiary of Manappuram Finance.
“This action is based on material supervisory concerns observed in 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,” the RBI said in a notification.
Over the last few months, the Reserve Bank has been sensitising the companies through various channels on the need to use their regulatory freedom responsibly and ensure fair, reasonable and transparent pricing, especially for small value loans. However, unfair and usurious practices continued to be seen during the course of onsite examinations as well as from the data collected and analysed offsite, the central bank said.
“In addition to usurious pricing, these NBFCs were variously found to be in non-adherence with the regulatory guidelines on assessment of household income and consideration of existing / proposed monthly repayment obligations in respect of their microfinance loans. Deviations were also observed in respect of Income Recognition & Asset Classification (IR&AC) norms resulting in evergreening of loans, conduct of gold loan portfolio, mandated disclosure requirements on interest rates and fees, outsourcing of core financial services, etc,” the RBI said.
These business restrictions have been made effective from the close of business on October 21, 2024 to facilitate closure of transactions in the pipeline, if any. These business restrictions do not preclude these companies from servicing their existing customers and carrying out collection and recovery processes in accordance with the extant regulatory guidelines, the RBI said.
These business restrictions will be reviewed upon receipt of confirmation from the companies regarding suitable remedial action having been taken to adhere to the regulatory guidelines at all times, 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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