Private Financial Companies

Non-banking Finance Companies (NBFCs), incorporated under the Companies Act, are regulated by Reserve Bank of India (RBI). As informed by RBI, the interest rates of lending have been deregulated for banks and NBFCs.  A cap on interest rate is specified only for NBFC-MFIs. In respect of NBFCs, the RBI has issued guidelines through the Fair Practices Code that require the Board of NBFCs to adopt an interest rate model taking into account relevant factors such as cost of funds, margin and risk premium and determine the rate of interest to be charged for loans and advances. Further, the rate of interest and the approach for gradations of risk and rationale for charging different rate of interest to different categories of borrowers is required to be disclosed to the borrower or customer in the application form and also to be communicated explicitly the in sanction letter. This ensures transparency in computation and communication of interest rates charged by NBFCs.

The details provided by RBI are Annexed.

This was stated by Shri Arjun Ram Meghwal, Minister of State for Corporate Affairs in written reply to a question in Lok Sabha.