The Reserve Bank of India (RBI) has banned four non-banking finance companies (NBFCs) from approving and distributing loans.
The companies affected are Ashirvad Micro Finance Limited, Arohan Financial Services Limited, DMI Finance Private Limited, and Navi Finserv Limited.
This action was taken because they were charging more interest than allowed.
The ban will take effect at the end of the business day on October 21.
However, these companies can still provide services to their existing customers and continue collecting payments as per the guidelines.
Reasons for the Ban
The RBI found that the interest rates on loans offered by these companies were too high compared to their weighted average lending rate (WALR)
and cost of funds, which violates RBI rules. Additionally, these NBFCs were not following several other important regulations.
In recent months, the RBI had asked these companies to maintain transparency in small value loans. Despite this, they continued to use unfair practices.
On October 9, 2024, RBI Governor Shaktikanta Das stated that the RBI is closely monitoring some NBFCs and will take necessary action.
Lifting of Restrictions
The RBI will review the restrictions once the companies confirm that they have made the necessary changes to comply with the rules.
These changes must include improvements in their pricing policies, risk management processes, customer service,
and problem-solving methods to ensure proper adherence to RBI guidelines.
