RBI bars four NBFCs including Navi Finserv over excessive pricing

What the Record Shows

By orders dated 17 October 2024, the Reserve Bank of India directed four non-banking financial companies to cease and desist from the sanction and disbursal of loans with effect from the close of business on 21 October 2024. The action, announced in a press release titled "Action against select NBFCs including NBFCs-MFIs", named Navi Finserv Limited (Bengaluru), Asirvad Micro Finance Limited (Chennai), Arohan Financial Services Limited (Kolkata) and DMI Finance Private Limited (New Delhi). The RBI acted under Section 45L(1)(b) of the Reserve Bank of India Act, 1934.

The order carried no monetary penalty. It was a supervisory business restriction: the four lenders were stopped from writing any new loans, while being expressly permitted to continue servicing existing customers and to carry out collection and recovery on accounts already on their books.

The RBI said the action followed material supervisory concerns in the way the four entities priced their loans. According to the press release, the weighted average lending rate (WALR) charged by these companies, and the interest spread they levied over their cost of funds, were "excessive and not in adherence with the regulations". The regulator also flagged non-adherence to the microfinance and scale-based regulation frameworks, breaches of the Fair Practices Code, and deficiencies in household-income assessment.

No individual was named in the order. The action was taken against the companies as regulated entities. Navi Finserv is part of the group co-founded by Sachin Bansal, and Asirvad Micro Finance is a subsidiary of Manappuram Finance.

How It Worked

The RBI framed its concern principally as one of pricing. Per the order dated 17 October 2024, the regulator found that the spread these lenders charged over their own cost of funds was excessive relative to what the regulations expect. For microfinance and small-ticket digital borrowers, a high spread compounds quickly across short-tenor loans, and the RBI's supervisory expectation is that pricing be fair, transparent and justifiable against the cost of funds.

Alongside pricing, the RBI cited a second strand for the microfinance lenders: the assessment of household income and of a borrower's existing and proposed monthly repayment obligations. Under the RBI's microfinance directions, a lender must satisfy itself that total repayment obligations do not exceed a defined share of household income. The press release pointed to deficiencies in how this assessment was carried out, the classic pathway to borrower over-indebtedness the framework is designed to prevent.

The order also recorded concerns beyond pricing and affordability. The RBI flagged issues with income recognition and asset classification norms and instances of what it described as evergreening of loans, along with an unauthorised gold-loan portfolio, inadequate disclosure to borrowers, and weaknesses in outsourcing and grievance redress.

The mechanism of the restriction was procedural rather than punitive. Under Section 45L(1)(b), the RBI can issue directions to an NBFC in the public interest. Rather than levy a fine, the regulator suspended the most consequential activity, fresh lending, until the companies demonstrated that they had corrected the flagged practices. The press release said the restrictions would be reviewed on receipt of confirmation that suitable remedial action had been taken, particularly on pricing policy, risk management, customer service and grievance redress. This is the supervisory playbook the RBI has used repeatedly with regulated lenders, prioritising correction of conduct over financial penalty.

Who Lost Money

There was no finding of investor loss in the order, and no depositor or investor money was placed at risk: NBFCs of this kind are lenders, not deposit-takers from the public in the manner of a bank or a chit fund. The people affected were borrowers and the businesses themselves.

Collectively, the four lenders served several million active loan accounts at the time of the order, spanning microfinance clients, small-ticket digital borrowers and consumers. The immediate practical effect fell on prospective borrowers, who could no longer draw fresh loans from these lenders while the restriction was in force, and on the companies, which lost their ability to originate new business for the duration.

Existing borrowers were not cut off. The RBI expressly allowed the companies to service current customers and to continue collection and recovery, so repayment schedules and account servicing carried on. No borrower was required to repay early, and no penalty was imposed on customers. For a reader trying to gauge what a lending pause means in practice, the honest answer is that it bites the lender's growth and the new-borrower pipeline far more than it touches existing accounts.

Where It Stands Now

All four restrictions have been lifted, and the companies have resumed lending. Per the RBI's subsequent releases, business restrictions on Navi Finserv were removed on 2 December 2024 and on Arohan Financial Services on 3 January 2025. In a press release dated 8 January 2025 titled "Removal of supervisory restrictions", the RBI removed the restrictions on Asirvad Micro Finance and DMI Finance with immediate effect.

The RBI said it lifted the curbs after the companies initiated remedial action and submitted their compliances, and that it was satisfied on the basis of their "adoption of revamped processes, systems" and their commitment to ensure fair loan pricing on an ongoing basis. In effect, the entire cycle from restriction to clearance ran roughly eleven weeks for the last two lenders, and less for the first two.

Separately, and not to be conflated with the October order, the RBI imposed a monetary penalty of Rs 6.2 lakh on Asirvad Micro Finance on 21 February 2025 for lapses relating to gold-loan factsheets and credit-bureau reporting. That is a distinct enforcement action. The October 2024 order itself carried no such penalty and has been fully rescinded as to all four entities.

What It Means

The episode is a clear illustration of how the RBI's conduct supervision of NBFCs actually works. The regulator's most powerful everyday tool is not a fine but the suspension of new business, which concentrates a lender's attention on fixing the flagged practice far more effectively than a penalty a large company can absorb. It is also a reminder that "excessive and not in adherence with the regulations" is a supervisory characterisation of pricing conduct, not a finding of usury or fraud, and that all four lenders were cleared once they revised their processes.

For a borrower, the practical takeaway is to read the pricing of any loan closely: the annual percentage rate, the spread over the lender's cost of funds, and the key fact statement that sets out the total cost. You can sanity-check what a quoted rate means for your monthly outgo using a personal loan EMI calculator, and if you are dealing with aggressive collection or recovery conduct, the Oquilia loan-trap guide sets out your rights. The RBI has taken similar restriction-first action against other lenders, including IIFL Finance over its gold-loan practices and Bajaj Finance over disclosure lapses; the pattern is consistent. More enforcement coverage is collected in the Oquilia enforcement archive.

FAQ

What exactly did the RBI order on 17 October 2024?

The RBI directed Navi Finserv, Asirvad Micro Finance, Arohan Financial Services and DMI Finance to stop sanctioning and disbursing new loans from 21 October 2024, under Section 45L(1)(b) of the RBI Act, 1934. The order cited pricing the RBI found excessive and other supervisory concerns. It carried no monetary penalty and allowed servicing of existing loans.

Did the RBI find these lenders guilty of fraud or usury?

No. This was a supervisory business restriction by the RBI, not a criminal proceeding or a court finding. The RBI's language was that pricing was "excessive and not in adherence with the regulations". No individual was named, no fraud was alleged, and all four lenders were cleared once they revised their practices.

Have the restrictions been lifted?

Yes. Per RBI releases, curbs on Navi Finserv were removed on 2 December 2024, on Arohan on 3 January 2025, and on Asirvad Micro Finance and DMI Finance on 8 January 2025, after the RBI accepted their remedial measures and commitments on fair pricing.

Did existing borrowers lose access to their loans?

No. The order expressly permitted the companies to service existing customers and to continue collection and recovery. The restriction applied only to new loans, so existing accounts, repayment schedules and servicing continued as normal.

What is the Rs 6.2 lakh penalty on Asirvad about?

That is a separate action. On 21 February 2025 the RBI penalised Asirvad Micro Finance Rs 6.2 lakh for lapses relating to gold-loan factsheets and credit-bureau reporting. It is distinct from the October 2024 lending restriction and should not be conflated with it.

Where can I read the official record?

The RBI's press release of 17 October 2024 and its removal notice of 8 January 2025 are published on rbi.org.in and are linked below.

This report is based on the RBI press release dated 17 October 2024 and the RBI press release on removal of restrictions dated 8 January 2025, reviewed on 31 July 2026.