Finance is not the Wild West; there is no place for cowboys here
Subscribe to enjoy similar stories. Regulators, especially financial sector regulators, need to bare their teeth from time to time.
And, when the occasion demands, show they are capable of biting as well. The Reserve Bank of India’s (RBI) recent action, imposing business restrictions on four non-banking finance companies (NBFCs) – Asirvad Micro Finance Ltd, Arohan Financial Services Ltd, DMI Finance Pvt Ltd and Navi Finserv Ltd - asking them to cease and desist from sanction and disbursal of loans is of a piece with this well-enshrined philosophy.
According to the RBI, its action, effective from close of business of 21 October, is based on ‘material supervisory concerns observed 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 were found to be excessive.’ Further, their pricing policy was found to be ‘not in adherence with the regulations laid down in the Bank’s Master Direction (MD) relating to regulatory framework for microfinance loans and directions relating to NBFC-scale based regulation’, wherein the nature of the regulatory framework is directly a function of the size of the NBFC. Also read: Private lenders see stress in credit cards, personal loans in Q2 This is not the first time the RBI has come down on recalcitrant NBFCs.
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