In a major regulatory relief for two microfinance companies, the Reserve Bank of India has removed supervisory restrictions on Asirvad Micro Finance and DMI Finance Private, lifting curbs on 'sanction and disbursal of loans' that were imposed on October 2024, a circular informed on January 8.
The regulator had said in October 2024 that it observed concerns 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, found to be excessive and not in adherence with the regulations. This prompted RBI to act on four NBFCs and NBFC-MFI, citing 'material supervisory concerns', directing them to stop all sanction and disbursal of loans.
Was RBI Satisfied?
"Now, having satisfied itself based on companies’ submissions, and in view of their adoption of revamped processes, systems, and the companies’ commitment to ensure adherence to the Regulatory Guidelines on an ongoing basis, especially for ensuring fairness in the loan pricing, the Reserve Bank has decided to lift the afore-mentioned restrictions placed on both, Asirvad Micro Finance Limited and DMI Finance Private Limited, with immediate effect," RBI's press statement on January 8 said.
Listed NBFC Manappuram Finance holds over 98 percent stake in the MFI arm Asirvad Micro Finance, and Moneycontrol was first to report that its proposed public issue was deferred by the promoter, after the regulatory rap. Manappuram Finance had acquired Asirvad Micro Finance in 2015 as part of its diversification strategy. Business restrictions imposed on two other NBFCs - Navi Finserv and Arohan Financial Services - have already been lifted in December 2024 and January 2025, respectively. In October 2024, Bloomberg News reported that Arohan too had delayed its $200-million initial public offering plan after RBI's restrictions.
The MFI sector has been under stress since the start of this fiscal, and delinquency levels have been rising for most lenders.
The lenders had also violated rules for microfinance loans relating to assessment of household income and borrowers’ ability to make monthly repayments, RBI had said in October 2024.