On October 18, 2024, Manappuram Finance Limited issued a formal response to the Reserve Bank of India’s (RBI) recent directive concerning Asirvad Microfinance, a material subsidiary of the company. The RBI had directed Asirvad to halt the sanction and disbursal of new loans, effective October 21, 2024, citing regulatory violations in the company's pricing policies and interest rates, as well as non-adherence to fair practices.

In its statement, Manappuram Finance reaffirmed its commitment to implementing the necessary corrective measures as outlined by the RBI. The company emphasized that the matter has been swiftly brought to the attention of the Board of Directors, who have convened an urgent meeting to formulate an action plan aimed at addressing the concerns raised by the RBI. The Board is focused on ensuring that RBI’s directions are implemented in full, with a focus on maintaining a ‘compliance first’ culture across the organization.

Compliance and Governance at the Core

Manappuram Finance acknowledged the RBI’s feedback as an opportunity to strengthen its internal systems. The company stressed that it takes these issues with utmost seriousness and has committed to conducting a comprehensive review of its enterprise-wide governance, risk management, and regulatory compliance. This review will go beyond the observations made by the RBI to ensure that all aspects of Asirvad Microfinance’s operations are aligned with the regulatory framework.

The Board of Directors has also highlighted the importance of maintaining robust customer service for its existing clientele during this period. Asirvad Microfinance will continue to service its current customers and focus on loan recovery and collections as per the regulatory guidelines.

Immediate Steps and Future Plans

Manappuram Finance is in the process of finalizing a detailed plan of action, which will be submitted to the RBI within the stipulated timelines. This plan will cover the remedial actions required to rectify the pricing policy, risk management processes, and customer service mechanisms that were found lacking during the RBI’s review. Additionally, the company is committed to aligning its interest rates and loan pricing structures with the regulatory standards set by the RBI.

By prioritizing these changes, Manappuram Finance aims to ensure that its subsidiary, Asirvad Microfinance, adheres to the highest standards of fairness and transparency in its lending practices. The Board will closely monitor the implementation of these actions and work towards restoring complete compliance with the RBI’s Master Directions on microfinance loans and NBFC regulations.

Impact on Business Operations

While the RBI’s directive temporarily halts Asirvad Microfinance’s ability to sanction new loans, it does not affect the company’s ability to service existing loans. Manappuram Finance remains confident that with the implementation of the corrective actions, Asirvad will resume normal operations in due course.

This response from Manappuram Finance signals the company’s dedication to resolving the issues raised by the RBI and ensuring that its subsidiary operates in full compliance with the regulatory framework. As the company works towards addressing the RBI’s concerns, stakeholders can expect improved governance and stronger customer-focused policies in the near future.

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