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The Reserve Bank of India (RBI) has banned four non-banking financial companies (NBFCs) from sanctioning or disbursing new loans for charging excessive interest on loan amounts.
These four NBFCs include Sachin Bansal-led Navahi Finserv and Mitsubishi UFJ Financial Group-backed DMI Finance. The ban comes just ten days after RBI warned various NBFCs against charging higher interest. This restriction will come into effect immediately after the end of working hours on 22nd October i.e. 21st October. The other two companies that have also been banned include Mannapuram Finance-promoted Ashirwad Micro Finance Ltd and Kolkata-based Aarohan Financial Services Ltd.
Regarding the ban, the RBI said in a statement that when the operations of these companies were investigated by the central bank, they were charging unethically high interest on the loan amount. Similar irregularities were also found in the verification done by RBI after collecting the data. Let us tell you that while announcing the MPC decisions of RBI on October 9, RBI Governor Shashikant Das had warned NBFCs, micro finance companies and housing finance companies against charging high interest on loans. He said that the misconduct being done by these finance companies in the pursuit of expanding business instead of the policy of keeping the growth rate stable is unfair. RBI expressed concern over such irregularities and asked companies looking to expand their business at any cost not to do so. He also said that if the companies making such mistakes do not stop such activities themselves, then RBI will not hesitate to take strict action.