How some RBI-licensed NBFCs charge 600% interest and stay legal

**The Ken** (0:00)
If you're a salaried employee in India, and you need to borrow some money in a pinch, all you need to do is google, paisa dedo.
Any number of almost identical websites will pop up. Most will have half recognizable names like Zepto Finance or even Bharat loan. Some may even offer you cash in 15 minutes. And if you're desperate enough, those 15 minutes might be worth the cost of the loan and the interest you sign up for.
Even if that interest is at a rate of 600% per annum. Because that's the rate some of these NBFCs or non-banking financial companies are giving out loans at. And guess what, it's entirely legal, and the lenders are licensed by RBI.
And the result is an incredibly lucrative revenue source for the NBFCs and a vicious cycle for their borrowers.

**Mutasim Khan** (0:59)
Yeah, I spoke to a borrower also in the story, Esar, his initials.
He started with a 75k loan, and by the end of like five, six months, he was paying about 6 lakh rupees a month just to clear these loan payments. And he had like eight different loan apps from which he was borrowing. And it becomes a whole debt cycle.

**The Ken** (1:18)
You just heard my colleague, The Ken reporter Mutasim Khan. He spent days inside the story, speaking to fintech founders, regulators, and the victims of these kind of loans to understand what was happening. He found 25 such NBFCs. Some of them had even reported that their revenue grew by 3000 times from what it was the year before. From lakhs to crores in just a year.
But the surprising thing that Mutasim found was, in 2024, the RBI had actually issued temporary cease and desist orders against four large microfinancing companies. The reason? That they were lending at annual interest rates of 45%.
Now, most of the NBFCs have been able to charge what they do because the RBI doesn't enforce a cap on interest rates. But if it has considered 45% predatory in the past, then how do these NBFCs with rates more than 500% get away with it? I am joined by Mutasim in the studio today to explain how the system works and how it has worked as long as it has.
Hi, Mutasim. Thanks again for joining us on Daybreak today. So honestly, I want to start the story where you started, because the way you write it is so interesting and you know, funny in a dark way. Because you describe how buying NBFCs online is as easy as shopping for furniture, and that it can even be like the ultimate investment. And I'm quoting you here. You say, all someone would need is some money, the right playbook and a questionable conscience. Could you tell us why questionable conscience?

**Mutasim Khan** (3:21)
Thank you for having me again.
So basically, the answer to that question goes to the heart of the story, which is what this class of NBFCs is doing. So to begin with, which is the headline of the story also, they're charging interest rates north of 500-600% annualized. And that should stand out by itself because I'm sure whoever has even like heard of loans, even like on the surface, you know interest rates look like maybe 10%, 12%, 15% annualized. But here you have loans being offered at interest rates of 600% or more in some cases. So one loan that I applied got sanctioned at 857 something percent.
Although the caveat is that this does not mean that you take the loans for a year, which is where this thing about APR comes in. APR basically stands for Annual Percentage Rate, which is to say, okay, maybe you are taking the loan for 30 days, but what would the interest have looked like had you taken this same loan at the same terms for a year? And why that is important is the reason this rule is in place, NBFCs have to disclose APRs beforehand so that you can compare between different loans, whether those loans have a predatory rate or not. So yeah, that goes to the central theme of the story. So basically, at the beginning of the investigation, I found these bunch of NBFCs. So for example, there was this one NBFC which went from a 2 lakh revenue to something like an 81 crore revenue in just 12 months. Another NBFC went from 22 lakh to 105 crores in just 12 months, which is absurd. You don't see that kind of growth anywhere, maybe in an open AI or an anthropic, but for domestic local NBFCs, that's something which makes you scratch your head and see what's going on. So yeah, that's the questionable part of it.