RBI Permits Asirvad and DMI Finance to Restart Lending Activities
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Mumbai, Jan 8 (NationPress) The Reserve Bank has removed its prohibition on the sanction and disbursal of loans by Asirvad Micro Finance and DMI Finance Pvt Ltd, offering considerable relief to these two microfinance entities, according to a circular from the RBI issued on Wednesday.
The RBI had previously imposed restrictions in October 2024 against four Non-Banking Financial Companies (NBFCs) — Asirvad Micro Finance Ltd, Arohan Financial Services Ltd, DMI Finance, and Navi Finserv — due to significant supervisory concerns, instructing them to stop all loan sanctioning and disbursal activities effective from October 21.
Now, two of these firms have been granted permission to recommence their lending operations, as outlined in an RBI announcement.
The central bank indicated that this action stemmed from serious supervisory issues noted in the Pricing Policy of these firms, particularly relating to their weighted average lending rate (WALR) and the interest margin applied over their operational costs, which were deemed excessive and non-compliant with the established regulations.
These NBFCs were also found to be failing to comply with the stipulations set forth in the Fair Practices Code issued by the RBI. In addition to excessive pricing, they were non-compliant with regulatory guidelines concerning the assessment of household income and the evaluation of existing or anticipated monthly repayment commitments regarding their microfinance loans.
“Inconsistencies were also noted regarding Income Recognition & Asset Classification (IR&AC) norms, leading to the evergreening of loans, management of gold loan portfolios, mandatory disclosure requirements on interest rates and fees, and outsourcing of essential financial services,” stated the RBI.
The RBI clarified that the business restrictions were enacted at the close of business on October 21, 2024, to allow for the completion of any pending transactions.
These restrictions do not prevent the companies from serving their current clients and conducting collection and recovery activities in line with existing regulatory protocols.
Furthermore, the RBI mentioned that these business limitations would be reassessed upon receiving confirmation from the companies regarding appropriate remedial measures taken to comply with regulatory guidelines, especially concerning their pricing policies, risk management practices, customer service, and grievance resolution to the satisfaction of the Reserve Bank.
