Business

RBI Imposes Restrictions On Four NBFCs Over Regulatory Violations

On Thursday, the Reserve Bank of India (RBI) has imposed strict regulatory actions on four non-banking financial companies (NBFCs) – Asirvad Micro Finance Ltd, Arohan Financial Services Ltd, DMI Finance, and Navi Finserv – due to significant supervisory concerns.

These actions, effective from 21 October 2024, prevent the NBFCs from issuing or disbursing new loans until further notice.

RBI Cracks Down On Violations In Pricing & Loan Management Practices

The RBI’s decision follows the discovery of irregularities in these firms’ pricing policies, particularly related to their weighted average lending rate (WALR) and interest spreads.

According to the RBI, these NBFCs charged disproportionately high rates that violated the central bank’s regulations.

Regulators also found that the companies did not comply with the Fair Practices Code, particularly in assessing household income and borrowers’ ability to meet existing or proposed loan repayment obligations for microfinance loans.

In addition to pricing concerns, the RBI uncovered violations of regulatory norms concerning income recognition and asset classification, which led to practices such as evergreening of loans – a method used to mask bad loans.

Other issues included the mismanagement of gold loan portfolios, failure to meet mandatory disclosure requirements related to interest rates and fees, and improper outsourcing of core financial services.

Although restricted from disbursing new loans, these NBFCs can continue servicing existing customers, including conducting collection and recovery activities, as long as they comply with current regulations.

The RBI emphasized that these restrictions will remain in place until the companies take corrective measures to align their practices with regulatory guidelines.

This includes improvements in pricing policies, risk management, customer service, and grievance resolution mechanisms.

The restrictions will only be lifted once the RBI is satisfied that the necessary reforms have been implemented.

These developments come as part of the RBI’s ongoing efforts to ensure transparency and fairness in the financial sector, especially in the microfinance industry, where vulnerable borrowers are most at risk from predatory lending practices.

Also Read: SpiceJet Settles $23.39 Million Dispute With Aircastle For $5 Million

Mankrit Kaur

Recent Posts

Gautam Adani Hails Puri Lifeguards As Unsung Heroes During Rath Yatra Visit

Gautam Adani, Chairman of the Adani Group, visited Puri in Odisha during the annual Rath…

4 hours ago

Acharya Pramod Krishnam Slams Congress Over ‘Internal Emergency’ Allegation

Acharya Pramod Krishnam, stirred political debate by claiming an 'internal emergency' still exists within the…

4 hours ago

MRM Meeting: Pledge for Global Peace, Green India, De-addiction & Democratic Integrity

Taking a crucial step toward positive transformation, social reform, and global peace, the Muslim Rashtriya…

4 hours ago

India To Host 2029 World Police & Fire Games; Amit Shah Hails Global Recognition

India has been chosen to host the prestigious 2029 World Police and Fire Games in…

4 hours ago

Seeing The Lord Among Devotees Is The Pinnacle Of Humility: Gautam Adani At Rath Yatra

Gautam Adani, along with his wife and Karan, participated in the Rath Yatra in Puri,…

7 hours ago

PM Modi Interacts With Group Captain Shubhanshu Shukla Aboard The ISS

PM Narendra Modi interacted with Group Captain Shubhanshu Shukla, the first Indian to reach the…

8 hours ago