RBI Cracks Down: Navi Finserv, DMI Finance, and 2 Others Banned from Issuing New Loans Over High Interest Rates

The Reserve Bank of India (RBI) has stopped four finance companies from giving out new loans. These companies include Navi Finserv, led by Sachin Bansal, and DMI Finance, backed by Mitsubishi UFJ Financial Group. The ban was placed because these companies were found charging very high interest rates. The other two companies are Asirvad Micro Finance Ltd, promoted by Manappuram Finance, and Arohan Financial Services Ltd, based in Kolkata.

The ban will take effect from October 21, as stated by the RBI on Thursday. The central bank said that these companies were using unfair practices, charging high fees, and were not following proper rules when lending money. This action comes after RBI Governor Shaktikanta Das warned finance companies earlier this month about aggressive growth without focusing on sustainable business practices. He had expressed concern about high interest rates and extra charges some companies were applying to their customers.

Navi Finserv has responded by saying they are reviewing the RBI’s instructions and will address the issues raised. Asirvad Micro Finance has also said they are working on a detailed plan to comply with the RBI’s concerns.

The RBI explained that the ban was placed after it found problems with the companies’ loan pricing policies. The companies were charging higher interest rates than allowed and were not properly assessing whether borrowers could repay the loans. Some of the companies were also found violating other rules, such as not reporting income correctly, misclassifying loans, and not following proper disclosure requirements.

The RBI has been reminding companies to ensure fair and transparent pricing for their services. While these companies can still serve their existing customers, they cannot give out new loans until they fix these issues. The RBI will review the bans after confirming that the companies have taken proper steps to comply with all the regulations.