The Reserve Bank today said it has decided to lift the restrictions placed on former Flipkart co-founder Sachin Bansal-led Navi Finserv Limited with immediate effect. The RBI had asked Navi Finserv, along with three other NBFCs, to "cease and desist" from sanction and disbursal of loans from October 21, 2024.

The RBI says it had several rounds of interaction with the company for rectification of deficiencies. "Now, having satisfied itself based on company’s submissions, and in view of 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 central bank says in a statement.

On October 17, 2024, the RBI ordered four non-banking financial companies (NBFCs) -- Bansal-led Navi Finserv, DMI Finance, Asirvad Micro Finance and Arohan Financial Services -- to stop sanctioning and disbursal of loans.

The RBI's action was 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 RBI's regulations. These were also found to be not in conformity with the provisions laid down under the Fair Practices Code issued by the Reserve Bank.

Over the last few months, the Reserve Bank has been sensitising its regulated entities through various channels on the need to use their regulatory freedom responsibly and ensure fair, reasonable and transparent pricing, especially for small-value loans. However, as per the RBI, unfair and usurious practices continued to be seen during onsite examinations as well as from the data collected and analysed offsite.

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 or proposed monthly repayment obligations in respect of their microfinance loans, said the RBI.

The regulator said the deviations were also observed in respect of Income Recognition & Asset Classification (IR&AC) norms resulting in the evergreening of loans, conduct of gold loan portfolio, mandated disclosure requirements on interest rates and fees, outsourcing of core financial services, etc.