Reserve Bank of India i.e. RBI has stopped 4 non-banking finance companies (NBFCs) from making loan sanction and disbursement. RBI has taken action against Ashirwad Micro Finance Limited, Aarohan Financial Services Limited, DMI Finance Private Limited and Navi Finserv Limited due to charging more interest than the norm.
Giving information, RBI said that its decision will be effective from the end of the trading day on October 21. However, these restrictions do not prevent these companies from providing services to their existing customers, collecting and recovering as per the guidelines.
Apart from charging high interest, many rules were also not followed.
The interest payment on the Weighted Average Lending Rate (WALR) and cost of funds of these companies was high, which is not correct as per RBI rules. For this reason RBI has banned their business. Along with this, these non-banking finance companies have also been found not following many other rules.
RBI said, in the last few months, it was asked to maintain transparency in small value loans through different mediums. Even after this, these companies have adopted unfair and wrong practices. Earlier on October 9, 2024, RBI Governor Shaktikanta Das had said in his statement that we are keeping an eye on the functioning of some NBFCs and will not shy away from taking action.
Restrictions will be lifted after necessary improvements are made
RBI said, these restrictions will be reviewed after receiving confirmation from the companies that they have made the necessary reforms to ensure compliance with the rules. Specifically, these steps will include their pricing policy, risk management process, customer service and problem solving methods. So that, it can be ensured that the rules of RBI are being followed properly.
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