India’s central bank said on Friday it has removed restrictions imposed on Kolkata-based Arohan Financial Services against any fresh loan sanctions and disbursals with immediate effect.
The Reserve Bank of India (RBI) had in October barred Arohan Financial and three other non-banking financial companies (NBFC) from sanctioning and disbursing loans due to “usurious” pricing and charging a significant markup over their funding costs.
Arohan, which has operations in under-penetrated, low-income states, has a gross loan portfolio of 71.12 billion rupees ($829.45 million), according to its fiscal 2024 annual report.
The company has initiated remedial action and submitted compliance to the RBI’s regulatory guidelines, especially those regarding fairness in loan pricing, the central bank said.
The RBI in early December had removed the same restrictions on Navi Finserv, among those restricted in October.
Some Indian NBFCs are aggressively pursuing growth and chasing excessive returns on equity, which could pose financial stability risks, former central bank governor Shaktikanta Das said in October.
Over the past year, the RBI has warned the financial sector against “all forms of exuberance” and tightened the rules for credit card and personal loans.
The central bank has also made it more expensive for NBFCs to borrow from banks and imposed restrictions on non-compliant entities.
Reuters
