| WALR: The Weighted Average Lending Rate is the average interest rate charged by a lender on loans. It reflects the average cost of borrowing for all loans issued by the lender, taking into account the loan amounts and the interest rates applied to each loan. Evergreening of loans: It is a malpractice where lenders extend new loans to borrowers struggling to repay existing ones, often to avoid classifying the original loan as a non-performing asset (NPA). Excessive interest spread: It occurs when the difference between the interest charged on loans and the interest paid to depositors or lenders is disproportionately high. |
- The Reserve Bank of India (RBI) has directed four non-banking financial corporations (NBFCs) to halt loan sanctions and disbursals due to concerns about regulatory violations and usurious pricing practices.
- NBFCs Involved are Asirvad Micro Finance Ltd., Arohan Financial Services Ltd., DMI Finance Private Ltd. and Navi Finserv Ltd.
- Usurious pricing (charging excessively high interest rates) practices based on their weighted average lending rate (WALR) and excessive interest spreads.
- Violations of regulatory guidelines on household income assessment, existing repayment obligations, and evergreening of loans.
- Issues in the conduct of gold loan portfolios, mandated disclosure requirements, and outsourcing of core financial services.
Dig Deeper: Read about the difference between NBFCs and Banks in the context of loan disbursal norms.
