RBI bars Sachin Bansal's Navi Finserv, DMI Finance, two other NBFCs from loan sanction, disbursal effective from Oct 21

RBI bars Asirvad MFI, Navi Finserv, two other NBFCs from loan sanction, disbursal effective from October 21

The Reserve Bank of India (RBI) on October 17 has taken action against four NBFCs and NBFC-MFI citing material supervisory concerns, and asked these entities to cease and desist sanction and disbursal of loans.

These companies are Asirvad Micro Finance Ltd, Arohan Financial Services Ltd, DMI Finance, and Navi Finserv, as per RBI’s notification.

The central bank said that it has observed concerns in the Pricing Policy of these companies in terms of their Weighted Average Lending Rate (WALR) and the Interest Spread charged over their cost of funds, which are found to be excessive and not in adherence with the regulations, release said.

In addition to usurious pricing, these NBFCs were variously found to be in nonadherence with the regulatory guidelines on assessment of household income and consideration of existing or proposed monthly repayment obligations in respect of their microfinance loans, RBI said.

The central bank further said that deviations were also observed in respect of Income Recognition & Asset Classification (IR&AC) norms resulting in evergreening of loans, conduct of gold loan portfolio, mandated disclosure requirements on interest rates and fees, outsourcing of core financial services, etc.

The business restrictions were imposed will be effective from close of business hour on October 21, stated the release.

“These business restrictions do not preclude these companies from servicing their existing customers and carrying out collection and recovery processes in accordance with the extant regulatory guidelines,” added RBI.

RBI will review the restrictions after they receive confirmation from the companies regarding suitable remedial action having been taken to adhere to the regulatory guidelines at all times, more particularly their pricing policy, risk management processes, customer service and grievance redressal aspects, stated the banking regulator.

A Navi Finserv spokesperson said: "Navi Finserv is currently reviewing the circular received from the RBI and is committed to addressing all concerns raised by the regulator promptly and effectively, prioritising what’s right for our customers. The company remains dedicated to maintaining the highest standards of compliance, transparency, and customer care in its operations."