Shares of Manappuram Finance crashed 17% on 18 October after the Reserve Bank of India (RBI) prohibited the company’s subsidiary Asirvad Microfinance and other NBFCs from disbursing loans.

According to RBI, there were concerns regarding the pricing policy of these non-financial banking companies (NBFCs) that were deemed to be in excess and not in compliance with the regulations. 

Asirvad Microfinance is the company’s microlending arm that offers microfinance loans to low-income women. During the fiscal year 2024, the microfinance segment contributed 27% towards the company’s towel revenue. 

Asirvad Microfinance said, “We value the feedback provided by the honourable Reserve Bank of India and take on record the improvement areas suggested for Asirvad Microfinance. This matter has been immediately brought to the notice of our board and a meeting has been convened urgently to take immediate action.”

The company has been facing pressure from RBi, prior this year in May, the company received an advisory letter from the central bank limiting cash disbursal of loans. 

The central bank has reportedly instructed Non-Banking Financial Companies (NBFCs) to strictly comply with the Income Tax Act’s provision on cash disbursements, emphasising that no NBFC should disburse loans exceeding Rs 20,000 in cash.

In September, the Reserve Bank of India (RBI) directed gold financiers to review their processes, identify lapses, and implement corrective measures within three months, which brokerages believe may impact their growth. 

This follows the RBI’s concerns over irregular practices observed at certain gold finance companies in relation to loans issued against pledged gold ornaments and jewellery.

At 11:22 am, the shares of Manappuram Finance were trading 13.60% higher at Rs 153.20 on NSE.

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