India’s central bank ordered four non-bank lenders, including Navi Finserv and DMI Finance, to halt loans from October 21, citing excessive interest rates and regulatory breaches.

Earlier this month, in RBI monetary policy committee meeting, governor Shaktikanta Das issued a strong warning to non-banking lenders, especially microfinance institutions and housing finance companies, for aggressively chasing “growth at any cost” that could threaten the economy’s financial stability.

The companies flagged include Bengaluru-based Navi Finserv, New Delhi-based DMI Finance, Kolkata-based Arohan Financial Services, and Chennai-based Asirvad Micro Finance

The reason behind the ban is due to concern related to the pricing policy of these companies in terms of their lending rates, which are found to be excessive.

The funds raised will support Navi's mission to simplify access to finance, enhance its operations with robust underwriting practices, and broaden financial inclusion by providing seamless credit and exceptional customer service.

The RBI halted the lending operations of these companies as it flagged serious supervisory concerns about their pricing Policies, particularly excessive interest spreads and violations of the Weighted Average Lending Rate (WALR) rules.

RBI orders four NBFCs, including Asirvad Micro Finance, Arohan Financial Services, DMI Finance, and Navi Finserv, to cease loan disbursals due to regulatory violations related to excessive pricing and improper borrower assessment.

The RBI has barred Navi Finserv, DMI, Asirvad, and Arohan from issuing new loans, citing excessive interest rates and non-compliance with regulatory norms.