‘Excessive pricing’: RBI bars 4 NBFCs from giving loans

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

Reacting to the action, Navi Finserv said it is committed to conducting its business operations with the highest standards of compliance, customer service and transparency. “The company is reviewing the directions received from the Reserve Bank and will work with them, and address all the concerns raised with promptness and completeness,” it said in a statement.

The RBI said: “These business restrictions have been made effective from the close of business on October 21, 2024 to facilitate closure of transactions in the pipeline, if any.” 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, it said.

According to the RBI, these business restrictions will be reviewed upon receipt of 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, to the satisfaction of the Reserve Bank.

Over the last few months, the Reserve Bank has been sensitising its regulated entities through various channels on the need to use their regulatory freedom responsibly and ensure fair, reasonable and transparent pricing, especially for small value loans, the regulator said. “However, unfair and usurious practices continued to be seen during the course of onsite examinations as well as from the data collected and analysed offsite,” the RBI said.