Lenders Law

One of the most common questions raised by founders, CFOs, legal teams, and compliance officers in Base-Layer NBFCs (NBFC-BL) is:  “Can we lend to the same category of borrowers at rates as low as 8% and as high as 30%?” The short answer is:  Yes — RBI permits flexibility, but not arbitrariness. NBFCs can vary pricing significantly provided the variation is justified through a transparent, risk-based framework approved by the Board. This article explains what RBI expects, how interest rates should be determined, and what practices can expose an NBFC to supervisory concerns. RBI’s Core Requirements for Base-Layer NBFCs Under the Reserve Bank of India (Non-Banking Financial Companies – Responsible Business Conduct) Directions, 2025 , NBFCs must maintain: 1. A Board-Approved Interest Rate Policy: This policy must define: Internal methodology for setting interest rates; Risk-based pricing parameters; Rationale for deviations; Minimum and maximum rate bands; ...

  In the past year, the Reserve Bank of India (RBI) has imposed more than 100 monetary penalties on banks, NBFCs, fintechs, and cooperative institutions. These penalties span a wide range of compliance failures—from customer due diligence lapses to weak cyber security, and from outsourcing gaps to violations of lending norms. While the penalties differ in size, they all point to a common theme: regulatory compliance is non-negotiable . Here’s a breakdown of the most frequent reasons behind these actions. Category Typical Lapses Illustrative Orders Key Directions Change in management Failed to take prior written permission of the RBI before appointing a director Grewal Brothers Finance Company Private Limited (15 May, 2025) Mahindra Rural Housing Finance Limited (28 March, 2025) Habitat Micro Build Ind...

S. No. Policy Relevant Provision of Law Objective Remarks / Implementation Insights 1 Business Continuity Plan (BCP) & Disaster Recovery (DR) Policy Para 62, Reserve Bank of India (Non-Banking Financial Companies – Managing Risks in Outsourcing) Directions, 2025 Ensure uninterrupted business operations during disasters or cyberattacks. Ensure vendors follow recovery protocols; conduct regular mock drills and resilience testing. 2 Fair Practices Code Para 7, Reserve Bank of India (Non-Banking Financial Companies – Responsible Business Conduct) Directions, 2025 Promote transparency, ethical lending, and borrower protection. Use plain-language communications; disclose all charges upfront; avoid hidden clauses. ...