The Reserve Bank of India (RBI) has taken stringent action against four Non-Banking Financial Companies (NBFCs), including NBFC-MFIs, in exercise of its powers under Section 45L(1)(b) of the Reserve Bank of India Act, 1934.
The RBI has issued directions to Asirvad Micro Finance Limited, Arohan Financial Services Limited, DMI Finance Private Limited and Navi Finserv Limited, to cease and desist from sanction and disbursal of loans, effective from close of business of October 21, 2024.
This move is part of the RBI’s ongoing efforts to ensure the stability and compliance of the financial sector.
“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 as laid down in the Master Direction – Reserve Bank of India (Regulatory Framework for Microfinance Loans) Directions, 2022 dated March 14, 2022 (updated as on July 25, 2022) and Master Direction – Reserve Bank of India (Non-Banking Financial Company–Scale Based Regulation) Directions, 2023, dated October 19, 2023 (updated as on March 21, 2024). These are also found to be not in conformity with the provisions laid down under Fair Practices Code issued by the Reserve Bank, ” RBI said in a release.
The restrictions do not stop these companies from servicing their current customers or conducting collection and recovery activities.