RBI-licensed NBFCs are legally charging 600% annual interest on short-term personal loans. This comes after the RBI removed interest rate caps in 2022, creating a clear loophole for institutional lenders. The result: some of these lenders saw revenue jump by 4800% in a single year.
How We Got Here
The RBI's 2022 decision not to cap interest rates for NBFCs opened the door for these exorbitant lending practices. This echoes the 2021 crisis of illegal Chinese instant-loan apps, except now the 800% rates are perfectly legitimate.
The Numbers
- Many of these NBFCs, mostly incorporated in the 1980s and 90s, are available for sale online for as little as ₹1.90 crore.
- Dev-Aashish Capital, a 1995-registered NBFC, reported a revenue jump from ₹1.7 lakh in FY24 to ₹81 crore in FY25.
- Another lender, Solomon Capital, grew revenue 500X from ₹22 lakh to ₹105 crore in the same period.
- One NBFC claimed a cost of borrowing of up to 120% annually in its policy, but its audited filings showed finance costs closer to 2%.
- Most of these NBFCs operate below the RBI ombudsman's jurisdictional threshold, limiting avenues for borrower redressal.
What Happens Next
🇮🇳 Why This Matters for India
For low-income gig workers in Tier-2 cities like Lucknow and Indore, these 600% annual loans represent a debt trap that offers quick cash today for a massive cost tomorrow.
The Take
The clear winners are the NBFC owners quietly making astronomical returns, often by buying older, compliant shell companies. The losers are the desperate individuals caught in what is now a 'legal' debt trap. The real oversight miss isn't the interest rate itself, but the RBI's failure to ensure transparency on actual borrowing costs and effective grievance redressal for these small-ticket loans.
Source:
The Ken ↗