RBI lifts lending restrictions on Arohan Financial Services due to fair loan pricing, ensuring compliance with regulations
The Reserve Bank of India (RBI) has lifted the lending restrictions placed on Arohan Financial Services with immediate effect after the microfinance lender ensured fairness in the loan pricing.
RBI had issued directions to Kolkata-based NBFC-MFI Arohan Financial Services to cease and desist from sanction and disbursal of loans effective from close of business as of October 21, 2024.
The central bank had imposed business restrictions on Arohan and other three non-banking finance companies (NBFCs) – Asirvad Micro Finance, DMI Finance and Navi Finserv– based on material supervisory concerns observed 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, which were found to be excessive and not in adherence with the regulations as laid down in the master directions.
In a release issued on Friday, the Reserve Bank said Arohan initiated remedial action and submitted its various compliances to it. “Now, having satisfied itself based on 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 afore-mentioned restrictions placed on Arohan Financial Services, with immediate effect,” the central bank added.
Commenting on the development, Arohan Financial Services Managing Director Manoj Kumar Nambiar said, “We are delighted to receive the RBI order on lifting the restrictions today. On behalf of our 23 lakh bottom of the pyramid borrowers and 10,000 employees we thank the RBI with whom we worked very closely to understand, explain and make the necessary changes. We pride ourselves on being high on corporate governance in the Aavishkar Group and will continue to do the needful in this key business of Financial Inclusion.”
Arohan has announced a new risk-based pricing range from 19.99 per cent to 22.99 per cent across different borrower segments.
Notably, the RBI lifted the ban imposed on Sachin Bansal-led Navi Finserv in December last year.