RBI bars NAVI, DMI Finance and others from loan sanctioning and disbursal

The Reserve Bank of India (RBI) has issued a directive to four non-banking financial companies (NBFCs), including DMI Finance—backed by MUFG Bank—and NAVI, led by Sachin Bansal, to cease loan sanctioning and disbursement starting October 21.

Notably, DMI acquired the buy-now-pay-later app ZestMoney in January this year. 

The other two NBFCs affected by the RBI’s directive are Asirvad Micro Finance and Arohan Financial Services, both of which received detailed supervisory orders.

"This action is based on significant supervisory concerns regarding the Pricing Policy of these companies, particularly their Weighted Average Lending Rate (WALR) and the Interest Spread applied over their cost of funds, which were found to be excessive and not in compliance with regulations," the RBI said in a statement.

The Reserve Bank of India (RBI) has directed four NBFCs, including DMI Finance and NAVI, to halt loan sanctioning and disbursement from October 21, citing findings of excessive pricing practices and non-compliance with guidelines on assessing household income and monthly obligations for microfinance loans. This deadline allows these firms to complete ongoing transactions.

The RBI stated it will reconsider the restrictions once these NBFCs demonstrate compliance with guidelines on pricing policy, risk management, customer service, and grievance redressal.

Responding to the RBI action, a Navi Finserv spokesperson said, "Navi Finserv is currently reviewing the circular received from the RBI and is committed to addressing all concerns raised by the regulator promptly and effectively, prioritizing what’s right for our customers. The company remains dedicated to maintaining the highest standards of compliance, transparency, and customer care in its operations."

Earlier this year, the RBI imposed a similar ban on IIFL Finance’s gold loans, lifting it last month after compliance improvements were confirmed..