RBI Bars Navi Finserv, 3 NBFCs for Lending Violations

The Reserve Bank of India (RBI) has barred four non-banking financial companies (NBFCs), including Sachin Bansal’s Navi Finserv, from sanctioning and disbursing loans starting October 21, 2024. The ban affects Navi Finserv, Asirvad Microfinance, Arohan Financial Services, and DMI Finance, which were found guilty of charging exorbitant interest rates and failing to comply with regulatory pricing policies. The move is part of the RBI’s ongoing crackdown on excessive interest rates and non-compliance with guidelines.

Excessive Interest Rates and Non-Compliance

The RBI’s decision follows detailed inspections revealing that the NBFCs charged excessively high Weighted Average Lending Rates (WALR) and interest spreads, violating the Master Directions on Microfinance Loans and Scale-Based Regulations. These NBFCs were also found to be non-compliant with guidelines on assessing household income, loan repayment capabilities, and asset classification, leading to loan evergreening and improper management of gold loan portfolios.

Impact and Future Compliance

Although these companies can continue servicing existing customers, the ban on new loans will remain until they take remedial measures, including aligning their pricing policies and risk management processes with regulatory standards. The RBI has been warning NBFCs, particularly microfinance institutions (MFIs), about usurious lending practices, and this move underscores the central bank’s determination to ensure fair and transparent pricing in the financial sector.