Ankit Kumar’s Post

𝗥𝗕𝗜 𝗧𝗶𝗴𝗵𝘁𝗲𝗻𝘀 𝗚𝗿𝗶𝗽 𝗼𝗻 𝗡𝗕𝗙𝗖𝘀, 𝗥𝗲𝘀𝘁𝗿𝗶𝗰𝘁𝘀 𝗙𝗼𝘂𝗿 𝗢𝘃𝗲𝗿 𝗟𝗲𝗻𝗱𝗶𝗻𝗴 𝗖𝗼𝗻𝗰𝗲𝗿𝗻𝘀 The Reserve Bank of India (RBI) has ordered four NBFCs, including Asirvad Microfinance and Arohan Financial, to halt new loans from October 21, 2024, citing non-compliance with lending regulations. Morgan Stanley’s report hints that more companies could face scrutiny as RBI aims to enforce fair practices in the sector. The action signals intensified monitoring amid concerns of excessive lending rates and rising credit costs among non-banking lenders. #finance #news #RBIActions #Microfinance #NBFCRegulations Source:- https://lnkd.in/giAeVxZ8

The recent action by the Reserve Bank of India (RBI) against four NBFCs, including Navi Finserv and Asirvad Microfinance, highlights significant lapses in compliance and governance that extend beyond management. While management is directly responsible for day-to-day operations, the role of majority investors and board members cannot be ignored. These entities are entrusted with reviewing critical aspects of the business, including adherence to regulations, risk management, and pricing policies. When such serious non-compliance occurs, including deviations from guidelines on interest rates, income assessment, and loan classification, it raises questions about the quality of oversight by the board and investors. The management may execute the business practices, but the board members, who are supposed to monitor and guide company policies, must also be held accountable. This includes ensuring compliance with RBI norms and addressing red flags such as unfair pricing or improper loan classifications, which can harm borrowers and the financial system. Moreover, such issues point to the broader challenge of audit quality. If audits fail to catch discrepancies or irregularities in financial reporting and compliance, the systemic risk increases. In the case of these NBFCs, including Navi and Asirvad, RBI inspections revealed excessive interest rates, evergreening of loans, and non-compliance with income recognition and asset classification norms. Thus, while management plays a direct role, both the board and investors are equally responsible for ensuring robust compliance, and the failures observed by RBI indicate a collective shortfall in governance. The quality of internal audits is crucial in preventing such situations, and any lapses in this area can allow non-compliance to persist unchecked. #GovernanceFailure #NonCompliance #CorporateAccountability #NBFCAction #InvestorResponsibility #AuditQuality #RBIRegulations #BoardOversight #FinancialTransparency #MicrofinanceCompliance #InterestRateViolations #RBIAction #EthicalFinance #CorporateGovernance

🚨 RBI's Revised Fair Lending Norms Effective April 1, 2024 🚨 The Reserve Bank of India (RBI) has introduced significant changes to ensure fair lending practices, effective from April 1, 2024. Here’s what you need to know: 🔹 No More Revenue Enhancement through Penal Charges: Banks and NBFCs can no longer use penal charges on loan defaults as a revenue tool. Only "reasonable" penal charges are allowed. 🔹 Implementation Timeline: These rules will apply to existing loans from their next review or renewal date on or after April 1, but not later than June 30, 2024. 🔹 Focus on Credit Discipline: Penal charges are intended to enforce credit discipline, not generate revenue. Charges must be non-discriminatory and should only apply to the default amount. 🔹 No Capitalization of Penal Charges: Penal charges should not accrue interest. 🔹 Exclusions: The norms do not apply to credit cards, external commercial borrowings, trade credits, and structured obligations. These changes reflect the RBI’s commitment to ensuring fair lending practices and protecting borrowers from excessive penalties ! Throw your thoughts in the comments 💭 #RBI #FairLending #Banking #Finance #NBFC #LoanDefaults #CreditDiscipline #FinancialRegulations

RBI Directions: Cease and Desist Orders Issued to NBFCs The Reserve Bank of India (RBI) has issued cease and desist orders to four NBFCs, effective from October 21, 2024, under Section 45L(1)(b) of the RBI Act, 1934. The following companies are impacted: 1. Asirvad Micro Finance Limited (Chennai) - MFI 2. Arohan Financial Services Limited (Kolkata) - MFI 3. DMI Finance Private Limited (New Delhi) - ICC 4. Navi Finserv Limited (Bengaluru) - ICC Reason for Action: The action stems from significant supervisory concerns regarding the Pricing Policies of these companies, including: - Excessive Weighted Average Lending Rate (WALR) and Interest Spread. - Violations of RBI's Fair Practices Code and guidelines under:  - Master Directions for Microfinance Loans (2022)  - Scale-Based Regulation for NBFCs (2023) Additionally, deviations were observed in: - Assessment of household income and loan repayment obligations. - Income Recognition & Asset Classification norms. - Gold loan portfolio conduct. - Mandatory disclosure of interest rates and fees. - Outsourcing of core financial services. Impact on Market: Manappuram Finance, the parent company of Asirvad Micro Finance Limited, has seen its shares decline by over 20% in the last 5 days, reflecting investor concerns following the RBI directive. Next Steps: These restrictions aim to address compliance issues. Impacted NBFCs can still service existing customers and carry out collections, adhering to RBI guidelines. Restrictions will be lifted upon satisfactory corrective measures by the companies, ensuring adherence to pricing, risk management, customer service, and grievance redressal guidelines. This move reflects RBI’s commitment to fair and transparent lending practices across the sector. #RBI #NBFC #Microfinance #FinanceNews #BusinessUpdates #BankingRegulation #FairLendingPractices #ManappuramFinance #StockMarketUpdate

Related to #microfinance in India.

𝗥𝗕𝗜 𝗔𝗰𝘁𝘀 𝗔𝗴𝗮𝗶𝗻𝘀𝘁 𝗡𝗕𝗙𝗖𝘀: 𝗪𝗵𝗮𝘁 𝗗𝗼𝗲𝘀 𝗜𝘁 𝗠𝗲𝗮𝗻 𝗳𝗼𝗿 𝘁𝗵𝗲 𝗜𝗻𝗱𝘂𝘀𝘁𝗿𝘆? The Reserve Bank of India (RBI) has recently taken action against select NBFCs, including key microfinance institutions, for non-compliance with lending regulations. This decision highlights the RBI’s commitment to safeguarding borrowers and ensuring fair practices. But why has RBI intervened? 𝗞𝗲𝘆 𝗿𝗲𝗮𝘀𝗼𝗻𝘀 𝗳𝗼𝗿 𝗮𝗰𝘁𝗶𝗼𝗻: ✅ Excessive interest rates: NBFCs were found violating pricing policies, charging unreasonably high lending rates. ✅ Non-adherence to guidelines: Companies failed to comply with norms on household income assessment and proper loan classifications. ✅ Evergreening of loans: Violations were observed in income recognition and asset classification, leading to problematic lending practices. ✅ Outsourcing core functions: Several NBFCs outsourced critical financial services, breaching regulatory guidelines. Effective from October 21, 2024, these companies must cease loan disbursals but can continue servicing existing customers. This ensures a balance between enforcing strict guidelines and protecting ongoing financial commitments. The restrictions will remain until these NBFCs address their issues and adhere to fair pricing and risk management practices. 𝗥𝗕𝗜’𝘀 𝗰𝗿𝗮𝗰𝗸𝗱𝗼𝘄𝗻 𝘀𝗲𝗻𝗱𝘀 𝗮 𝗰𝗹𝗲𝗮𝗿 𝗺𝗲𝘀𝘀𝗮𝗴𝗲 𝘁𝗼 𝘁𝗵𝗲 𝗳𝗶𝗻𝗮𝗻𝗰𝗶𝗮𝗹 𝘀𝗲𝗰𝘁𝗼𝗿: 𝗰𝗼𝗺𝗽𝗹𝗶𝗮𝗻𝗰𝗲 𝗶𝘀 𝗻𝗼𝗻-𝗻𝗲𝗴𝗼𝘁𝗶𝗮𝗯𝗹𝗲, 𝗲𝘀𝗽𝗲𝗰𝗶𝗮𝗹𝗹𝘆 𝘄𝗵𝗲𝗻 𝗶𝘁 𝗰𝗼𝗺𝗲𝘀 𝘁𝗼 𝘀𝗮𝗳𝗲𝗴𝘂𝗮𝗿𝗱𝗶𝗻𝗴 𝘀𝗺𝗮𝗹𝗹 𝗯𝗼𝗿𝗿𝗼𝘄𝗲𝗿𝘀 𝗳𝗿𝗼𝗺 𝗲𝘅𝗽𝗹𝗼𝗶𝘁𝗮𝘁𝗶𝘃𝗲 𝗹𝗲𝗻𝗱𝗶𝗻𝗴. #NBFC #RBIAction #FairLending #Microfinance

Recently, the Reserve Bank of India (RBI) raised significant concerns regarding the pricing policies of certain Non-Banking Financial Companies (NBFCs). A key focus has been on their Weighted Average Lending Rate (WALR) and the Interest Spread above their cost of funds, which have been deemed excessive and not in compliance with regulatory guidelines. The RBI's findings highlight the following issues: Excessive Pricing: The rates charged by some NBFCs were found to be alarmingly high, raising questions about their affordability for consumers. Regulatory Non-Compliance: Many of these companies failed to adhere to established guidelines for evaluating household income and assessing the repayment capacities of borrowers, particularly for microfinance loans. Fair Practices: The actions taken are aligned with the Master Directions issued by the RBI, which emphasize the importance of fair practices in lending. The WALR serves as a critical indicator of lending costs, reflecting the rates at which institutions lend while factoring in the size and terms of loans. Its significance cannot be overstated, especially in ensuring transparency and accountability in financial services. As we navigate the evolving landscape of financial regulations, it’s crucial for both lenders and borrowers to understand the implications of WALR and its role in fostering responsible lending practices. Stay informed and advocate for fair lending practices! 💼💡 #Finance #RBI #WALR #NBFC #Lending #RegulatoryCompliance #Microfinance #FairPractices

The Reserve Bank of India (RBI) has barred four NBFCs— Navi Finserv, DMI Finance Private Limited, Asirvad Microfinance Limited - Official Page and Arohan Financial Services Limited —from disbursing new loans effective October 21, 2024. This action was prompted by concerns over excessive interest rates and violations of regulatory guidelines on loan pricing. The RBI found these companies’ pricing policies, especially their interest rates and spreads, to be unfair and not compliant with established rules. Additionally, there were issues with income assessments, asset classification, and transparency in their lending practices. While these NBFCs can still manage existing loans, they must address these issues to lift the restrictions. Share your thoughts about this topic.

The RBI lifted sanctions on Navi Finserv on 2nd December 2024, allowing it to resume loan disbursements after resolving lending practice issues. Earlier, the RBI had halted operations of four NBFCs, including Navi, citing excessive interest rates and regulatory violations. To get more insights about the microfinance sector register for our webinar on "India's Credit Down Cycle and Its Impact on Markets," presented by INRBonds and co-presented by Labham. Event Details: 🗓️ Date: 5th December 2024 ⏰ Time: 3:00 PM (IST) 💻 Format: Zoom Webinar 📋 Duration: 2 hours (including Q&A) 🎙️ Meet the Experts: ✨ Moderator: Arjun Parthasarathy, Founder & CEO, INR Bonds ✨ Panelists: Karthik Athreya , Director & Head of Strategy - Credit, Sundaram Alternates Suchindran V. G. , Ex-CFO Veritas Finance & Ex-CEO IFMR Investment Advisor Services Abhinaba Saha, Senior Correspondent, Mint Anil Gupta, Senior Vice President & Co-Group Head, Financial Sector Ratings, ICRA 🚀 Don’t miss out on this opportunity to gain actionable insights and strategies for navigating the bond and equity markets during challenging times. 👉 Register Here: https://lnkd.in/g6y_EkAX #INRBonds #Webinar #CreditDownCycle #BondMarkets #EquityMarkets #FinanceInsights #Indianmarket

𝗥𝗕𝗜 𝗪𝗮𝗿𝗻𝘀 𝗡𝗕𝗙𝗖𝘀: 𝗙𝗼𝗰𝘂𝘀 𝗼𝗻 𝗖𝗼𝗺𝗽𝗹𝗶𝗮𝗻𝗰𝗲, 𝗔𝘃𝗼𝗶𝗱 𝗥𝗶𝘀𝗸𝘆 𝗚𝗿𝗼𝘄𝘁𝗵 𝗦𝘁𝗿𝗮𝘁𝗲𝗴𝗶𝗲𝘀 The Reserve Bank of India (RBI) has advised non-banking financial companies (NBFCs), including microfinance institutions (MFIs) and housing finance companies (HFCs), to prioritize compliance and address customer grievances effectively. Highlighting the risks of chasing excessive returns, the RBI cautioned that high interest rates and fees could pose financial stability risks. While urging self-correction, the RBI emphasized the need for strong underwriting and monitoring practices to avoid systemic risks and ensure long-term stability. #finance #RBI #NBFCs #FinancialStability #RiskManagement Source:- https://lnkd.in/guUUafi5