RBI's 'cease and desist' directive on NBFCs not arbitrary: Shaktikanta Das

RBI Governor explains regulatory actions in conversation with Tamal Bandyopadhyay at the Business Standard BFSI Insight Summit

Reserve Bank of India (RBI) Governor Shaktikanta Das clarified that recent actions against non-banking financial companies (NBFCs) reflect the central bank’s “corrective” approach rather than a punitive stance. He added that out of 9,400 NBFCs in India, action was taken against only four, highlighting that the RBI’s restraint is greater than its interventions.

 

Speaking with Tamal Bandyopadhyay at India’s biggest banking, financial services, and insurance (BFSI) event, the Business Standard BFSI Insight Summit on Wednesday, Das explained that NBFCs do not need to worry as these actions followed months of "bilateral interactions with the agencies." 

  "There are 9,400 NBFCs. Out of these, actions have been taken against four. Therefore, RBI action is very calibrated and selective. Action is taken in a measured way—not abrupt or sudden. It is preceded by months of bilateral interactions with the agencies," Das said.

   

When asked if "cease and desist" represents the "new RBI," Das explained that the central bank’s approach is to be more transparent in its communication.

 

"Our effort has been far more consultative, with direct engagement, transparent communication, and measured action. It is not abrupt; it is not arbitrary," he said, adding that the RBI ensures it communicates its reasoning "in a fairly explicit way" through official releases.

 

He added, "If compliance is 100 per cent, or near 100 per cent, and we are confident that the remaining corrective steps will be taken in the next few weeks or months, we will withdraw the restrictions."

 

Cease and desist letters sent to four NBFCs

The RBI recently intensified its regulatory scrutiny of NBFCs, directing four prominent firms to temporarily stop issuing new loans.

 

This directive, effective from October 21, 2024, targets Asirvad Micro Finance Limited, Arohan Financial Services Limited, DMI Finance Private Limited, and Navi Finserv Limited.

 

The RBI’s decision, issued under Section 45L(1)(b) of the RBI Act, 1934, stems from concerns around lending practices that have raised questions about adherence to regulatory standards.

 

"All actions are taken in the interest of consumers," Das said, emphasising that the RBI's aim is to ensure that NBFCs meet fair lending standards.

 

The central bank has confirmed it will review the status of each firm once it receives evidence of remedial measures to address the highlighted concerns. According to Das, this approach is intended to uphold regulatory integrity while providing companies with opportunities to realign with the industry’s best practices.

 

Das reiterated that these steps were not "abrupt or arbitrary" but instead based on careful, case-by-case evaluation. 

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