The Reserve Bank of India (RBI) has removed business restrictions imposed on Kolkata-based microfinance institution Arohan Financial Services Limited following remedial measures initiated by the lender and its commitment to adhere to fair loan pricing, the regulator said on Friday.

       On October 17, the regulator directed four non-banking finance companies (NBFCs) to cease and desist from sanctioning and disbursing loans, effective from the close of business on October 21, 2024. Last month, restrictions were removed from Sachin Bansal’s Navi Finserv.

       The other two entities are Asirvad Micro Finance, a subsidiary of Manappuram Finance, and DMI Finance, where the restrictions are still in place.

       “The company initiated remedial action and submitted its various compliances to the Reserve Bank,” the regulator said in a statement.

       “Now, having satisfied itself based on the company’s submissions, and in view of their adoption of revamped processes, systems, and the company’s 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 aforementioned restrictions placed on Arohan Financial Services Limited, with immediate effect,” RBI said in a statement.

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       While imposing restrictions, the RBI said these entities were found charging usurious interest rates to their customers and had violated several norms.

       “In addition to usurious pricing, these NBFCs were variously found to be in non-adherence with the regulatory guidelines on assessment of household income and consideration of existing/proposed monthly repayment obligations in respect of their microfinance loans,” the RBI had said.

       The self-regulatory organisations (SROs) for MFIs have put in place safeguards like limiting the number of microfinance lenders to a borrower to four and capping total indebtedness to ensure market discipline and borrowers’ welfare.

       The share of micro-credit in the total retail lending portfolios of NBFCs stood at 10.8 per cent at the end of March 2024, according to RBI data.

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