The Reserve Bank of India (RBI) on Thursday barred four non-banking financial companies (NBFCs), halting their loan sanction and disbursal activities starting from October 21. The NBFCs include, Asirvad Micro Finance, Arohan Financial Services, DMI Finance Private and Flipkart founder Sachin Bansal’s Navi Finserv.
The Central Bank recognised the concerns regarding the Pricing Policy of these companies, specially in relation to their Weighted Average Lending Rate (WALR) and the Interest Spread above their cost of funds. The rates charged by these NBFCs have been deemed excessive and not in compliance with regulatory guidelines.
According to the RBI, in addition to charging excessively high prices, these NBFCs were found to be not following regulatory guidelines on evaluating household income and factoring in current or future monthly repayment responsibilities for their microfinance loans.
However, the restrictions do not prevent these companies from servicing their existing customers and carrying out collection and recovery processes.
The RBI will review the imposed restrictions after these companies provide evidence of corrective actions, particularly regarding their pricing policies, risk management, customer service and grievance redressal mechanisms.
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