RBI bars 4 NBFCs from sanction and disbursal of loans from Oct 21

The Reserve Bank of India (RBI) has ordered four NBFCs and NBFC-MFIs—Asirvad Micro Finance Ltd, Arohan Financial Services Ltd, DMI Finance, and Navi Finserv—to stop sanctioning and disbursing loans as of the close of business on October 21, 2024. This decision was driven by significant supervisory concerns, particularly with the companies' pricing policies. RBI found that their Weighted Average Lending Rate (WALR) and the Interest Spread over their cost of funds were excessively high and non-compliant with regulations. Additionally, these NBFCs violated guidelines on assessing household income, monthly repayment obligations, and the evergreening of loans. There were also issues with Income Recognition and Asset Classification (IR&AC) norms, loan portfolio management, and disclosure requirements. However, the restrictions do not prevent the companies from servicing existing customers or collecting repayments. The RBI will review these restrictions after the companies take appropriate corrective actions to align with regulatory standards, particularly regarding pricing policies and customer grievance processes.