RBI action on Manappuram Finance subsidiary Asirvad Microfinance rattles shares

Manappuram Finance shares witnessed significant volatility recently after the Reserve Bank of India imposed restrictions on its subsidiary, Asirvad Microfinance. The central bank took stringent measures against four prominent Non-Banking Financial Companies (NBFCs), including Asirvad Micro Finance, for not complying with regulatory guidelines on pricing and fair lending practices.

As per RBI's directions, the entities have been asked to cease sanctioning and disbursing any new loans with immediate effect. The central bank observed excessive pricing concerns and lack of adherence to regulations pertaining to Weighted Average Lending Rate and interest spread charged over cost of funds. This prompted the coercive action to ensure consumer protection.

Investors reacted nervously to the development, sending Manappuram Finance stock tumbling over 18% intraday. It has corrected considerably in the last few weeks amid increasing regulatory oversight of the NBFC sector. Earlier, IIFL Finance witnessed curbs for certain supervisory lapses as well.

Overall, Manappuram Finance shares have followed a downward trajectory of late. The scrip has plunged more than 16% in the past five sessions alone. It has wiped out around 26% value in the last month and declined 18% in the preceding six months. While the stock has given 9% returns in a year, it is still lower by approximately 10% since the start of the current year.

Going forward, the lending major will aim to regain investors' trust by firmly adhering to regulatory and compliance protocols. However, frequent RBI actions against NBFC subsidiaries continue posing challenges for their listed parent companies.