Manappuram Finance soars after RBI lifts restriction imposed on microfinance arm

Manappuram Finance jumped 4.53% to Rs 188.20 after the Reserve Bank of India lifted the restrictions imposed on Asirvad Micro Finance with respect to sanction or disbursal of loans with immediate effect.

In October last year, the countrys banking regulator had issued directions to certain NBFCs, including NBFCs-MFIs, to cease and desist from sanction and disbursal of loans. Asirvad Micro Finance, the subsidiary of Manappuram Finance, was one of the entities that had been restricted by the RBI.

This action of the RBI was based on material supervisory concerns observed in the Pricing Policy of these companies in terms of their Weighted Average Lending Rate (WALR) and the Interest Spread charged over their cost of funds, which are found to be excessive and not in adherence with the regulations of the Central Bank.

 

In addition to usurious pricing, these NBFCs were variously found to be in non-adherence with the regulatory guidelines on assessment of household income and consideration of existing / proposed monthly repayment obligations in respect of their microfinance loans.

Deviations were also observed in respect of Income Recognition & Asset Classification (IR&AC) norms resulting in evergreening of loans, conduct of gold loan portfolio, mandated disclosure requirements on interest rates and fees, outsourcing of core financial services, etc.

In a statement released on 08 January 2025, the RBI said that Asirvad Micro Finance had initiated remedial action and submitted various compliances to the Reserve Bank.

Satisfied with the companys submissions, and in view of the adoption of revamped processes, systems, and the companys commitment to ensure adherence to the regulatory guidelines on an ongoing basis, especially for ensuring fairness in the loan pricing, the Reserve Bank announced its decision to lift the previously imposed restrictions with immediate effect.

Manappuram Finance is one of India's leading gold loan NBFCs.

The company's consolidated net profit added 2.19% to Rs 570.65 crore on 21.30% increase in total income to Rs 2,637.14 crore in Q2 FY25 over Q2 FY24.

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