The Reserve Bank of India (RBI) has taken strict action on four non-banking financial companies (NBFCs) due to regulatory concerns. These include Asirvad Micro Finance, Arohan Financial Services, DMI Finance, and Navi Finserv.
The Reserve Bank of India (RBI) on October 17 took action against four non-banking financial companies (NBFCs) and microfinance institutions (NBFC-MFIs) and banned them from passing and distributing loans. This ban has been imposed due to some regulatory concerns of these companies. According to RBI, the companies on which this action has been taken include Asirvad Micro Finance Limited, Arohan Financial Services Limited, DMI Finance and Flipkart co-founder Sachin Bansal’s Navi Finserv.
RBI has cited flaws in the pricing policy of these companies. It has been found that the companies are charging more than the weighted average lending rate (WALR) and interest rate on the loan. Regulators also found that it is violating the rules. Apart from this, irregularities were also found in the assessment of household income for giving microfinance loans and not properly assessing the existing or proposed monthly payment obligations of the companies.
RBI also said that violations of Income Recognition and Asset Classification (IR&AC) rules, operation of gold loan portfolio, lack of necessary disclosures on interest rates and fees, and outsourcing of key financial services were also not followed by the companies. These restrictions on business will come into effect from October 21. However, the process of servicing existing customers, collection and recovery can continue under the existing guidelines of RBI.
RBI has said that the restrictions will continue until these companies fix all their policies, risk management process, customer service and grievance redressal aspects. A Navi Finserv spokesperson said, “Navi Finserv is currently reviewing the RBI circular and is committed to resolving all the issues raised by the regulator quickly and effectively. The company will continue to follow the highest standards in its operations.”
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