MUMBAI: The Reserve Bank of India (RBI) has lifted supervisory restrictions on Asirvad Microfinance Ltd, a Chennai-based microlender and a key subsidiary of Kerala-headquartered Manappuram Finance, with immediate effect.
The sanctions, imposed on October 17, 2024, had prohibited Asirvad from sanctioning and disbursing loans from October 21, 2024. These restrictions were reportedly linked to non-compliance with regulatory guidelines, particularly fairness in loan pricing.
IPO plans?
All eyes are now on whether Asirvad Microfinance’s promoter will revive the IPO plan, which was initially suspended midway following SEBI’s directions but later approved by the regulator after a few months. The plan aimed to raise Rs1500 crore through a fresh issue of shares.
In its statement on Wednesday (January 8), the RBI said the decision to lift the restrictions followed compliance submissions and the adoption of revamped processes by Asirvad. “Having satisfied itself based on the company’s submissions and its commitment to ongoing adherence to regulatory guidelines, the Reserve Bank has decided to lift the aforementioned restrictions,” the central bank said.
Impact on Manappuram Finance
The RBI sanctions had a pronounced impact on Asirvad, disrupting its microlending operations during the peak festive lending season. The company, a significant contributor to the consolidated revenues of its Kerala-based parent Manappuram Finance, was unable to disburse loans for over two months, likely affecting the group’s overall performance.
Manappuram, one of India’s leading gold loan providers, has been diversifying its portfolio through subsidiaries like Asirvad. The restrictions highlighted the challenges of regulatory compliance across its expanding businesses, potentially impacting investor sentiment toward the group.
Road ahead
Asirvad undertook extensive remedial measures, including revamping its loan pricing mechanisms, to address the RBI’s concerns. These efforts, combined with assurances of ongoing regulatory compliance, led to the lifting of the sanctions.
With the restrictions now removed, Asirvad is poised to resume its lending activities. For Manappuram Finance, this development offers an opportunity to rebuild momentum in its microfinance segment and potentially revisit IPO discussions for its subsidiary.
Other companies
The RBI also lifted similar sanctions on two other non-banking financial companies – Navi Finserv Pvt Ltd and Arohan Financial Services Ltd – after they met compliance requirements. The central bank’s orders for these entities were issued on December 2, 2024.
Asirvad’s recovery, coupled with the easing of regulatory constraints, signals a fresh start for the company and its Kerala-based parent, Manappuram Finance.
