RBI Permits Home Loan Disbursements That Were Approved Before October 20: Navi Finserv

Nitin Konde, Varun Bhardwaj

Oct 31, 2024 — 2 min read

RBI Approves Pending Home Loan Disbursements Navi Finserv

Navi Finserv, owned by Sachin Bansal, announced on 29 October 2024 that the Reserve Bank has permitted the company to make scheduled home loan disbursals that were approved before October 20. Navi Finserv had previously been prohibited from offering new loans.

Due to significant supervisory concerns, including unlawful pricing, the RBI had earlier this month ordered Navi Finserv to stop and refrain from approving and disbursing loans as of October 21 close of business.

Navi Finserv has been given permission by the Reserve Bank of India (RBI) to begin disbursing scheduled housing loans that were approved prior to October 20, 2024. According to the Bengaluru-based company's press release, the authorisation is valid until December 31, 2024.

Relief to Home Buyers

Many homebuyers whose loans were approved before the RBI's regulatory action and who are still awaiting their previously planned disbursements would find significant relief from the RBI's approval.

In addition to Navi, the central bank had imposed the same limitations on three other NBFCs: Chennai-based Asirvad Micro Finance Limited, Kolkata-based Arohan Financial Services Limited, and New Delhi-based DMI Finance Private Limited.

Why RBI Imposed Restrictions on these NBFCs?

With effect from October 21st, the central bank said the action is based on significant supervisory concerns about these companies' pricing policies, specifically their Weighted Average Lending Rate (WALR) and the interest spread charged over their cost of funds, which were determined to be excessive.

The Master Direction (MD) pertaining to the regulatory framework for microfinance loans and the MD relating to NBFC-scale based regulation also state that their pricing approach does not comply with the rules. According to an RBI statement, the pricing policy was also determined to be noncompliant with the guidelines established by the Reserve Bank's Fair Practices Code.

These businesses are still able to provide services to their current clients and conduct collection and recovery procedures in compliance with current regulations, notwithstanding these business restrictions. DMI Finance Pvt Ltd and Navi Finserv Ltd are categorised as investment & credit firms within the NBFC sector, whereas Asirvad Micro Finance Ltd and Arohan Financial Services Ltd are categorised as mirofinance institutions.

In his most recent bi-monthly monetary policy statement, RBI Governor Shaktikanta Das pointed out that certain NBFCs were pursuing growth at a rapid pace without establishing risk management frameworks and sustainable business practices that were appropriate for the size and complexity of their portfolios.

He warned that a reckless "growth at any cost" strategy would be detrimental to their own well-being. Das also pointed out that some NBFCs, such as microfinance institutions (MFIs) and housing finance companies (HFCs), are pursuing excessive returns on their equity due to the substantial accretion of capital from both domestic and foreign sources, as well as occasionally pressure from their investors.