Reserve Bank of India (RBI) has banned 4 non-banking finance companies (NBFCs) from sanctioning and disbursing loans. RBI has taken action against Ashirvad Micro Finance Limited, Arohan Financial Services Limited, DMI Finance Private Limited and Navi Finserv Limited for charging more interest than the prescribed rate.
Reserve Bank of India informed that its decision will be effective from the end of the business day of October 21. However, these restrictions do not prevent these companies from providing services to their existing customers, making collections and recovery as per the guidelines.
Apart from charging high interest, they also did not follow many rules
The payment of interest on the Weighted Average Lending Rate (WALR) and cost of funds of these companies was high, which is not correct under the rules of RBI. For this reason, RBI has banned their business. Along with this, regulators have also not found these non-banking finance companies to be following many other rules, causing compliance objections.
The Reserve Bank of India said that, in the last few months, it asked for transparency in small-value loans through different means. Even after this, these companies have adopted unfair and wrong practices. Earlier on 9 October 2024, RBI Governor Shaktikanta Das had said in his statement that we are keeping an eye on the functioning of some NBFCs and they will not shy away from taking action.
Reserve Bank of India – The authorities will lift the restrictions after they make the necessary reforms
The Reserve Bank of India said it will review these restrictions when the companies confirm that they have made the necessary improvements to ensure compliance with the rules. In particular, these steps will include their pricing policy, risk management process, customer service and problem-solving method. So that, it can be ensured that RBI rules are being followed properly.
