How public speeches have become RBI’s tool for signalling crackdowns

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Subscribe to enjoy similar stories. Mumbai: The Reserve Bank of India (RBI) has been using public speeches by its top brass to hint at upcoming regulatory action against specific institutions or even some lending practices, showed a Mint analysis. This was evident when the regulator barred four non-bank financiers, including two microfinance institutions, from fresh lending.

According to RBI’s statement on 17 October, this was due to “material supervisory concerns" in loan pricing. This came just a week after governor Shaktikanta Das said the RBI found some non-banking financial companies (NBFCs) “aggressively pursuing growth without building up sustainable business practices and risk management frameworks". He also said that concerns arise when the interest rates charged by them become “usurious and get combined with unreasonably high processing fees and frivolous penalties".

Also Read: RBI cautions micro lenders, NBFCs against high, ’usurious’ interest rates This is not an isolated case. Less than two weeks before the regulator barred Edelweiss ARC from buying new assets in May, two deputy governors made speeches about how RBI has observed certain practices in asset reconstruction companies. Deputy governor Swaminathan J.

pointed out that the RBI found cases where “assets are sold to group entities without following the arm’s length principle and without subjecting them to scrutiny under related party transactions." To be sure, none of the speeches by RBI officials directly refer to companies and are more of a warning to the industry at large. RBI is not the only regulator giving hints on issues it is uncomfortable with. India's markets regulator, Securities and Exchange Board of India (Sebi), has also been quite vocal