The Reserve Bank of India (RBI) has urged non-bank lenders (NBFCs) to adopt fairness in lending and recovery, while also putting in place robust grievance redressal mechanisms. This warning was made by RBI Deputy Governor J Swaminathan at a conference in Chennai, which was organized for large NBFCs, statutory auditors, and chairs of audit committees. Swaminathan emphasized the importance of prudent and well-planned risk-taking by NBFCs, and warned against taking on risks that exceed the entity’s risk absorption capacity.
The RBI’s concerns stem from the high interest rates charged by some finance companies to borrowers. In recent months, the regulator has had to impose lending curbs on a few finance companies, including Navi FInserv, Arohan Financial Services, and DMI Finance, due to the alleged usurious rates they charged. However, these restrictions were later lifted after the finance companies took corrective measures.
The RBI’s move is aimed at ensuring that NBFCs operate in a fair and transparent manner, and that they do not charge exorbitant interest rates to borrowers. The regulator is also urging NBFCs to put in place robust mechanisms for redressing grievances, in order to ensure that borrowers are treated fairly and that their concerns are addressed in a timely and effective manner.
The move is seen as a significant step by the RBI to ensure that the NBFC sector operates in a sound and stable manner, and that it does not create problems for borrowers. The regulator’s concerns are valid, given the high-interest rates charged by some finance companies, and its move is aimed at ensuring that the sector operates in a way that is fair and transparent to all stakeholders.