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.

State/UT	Cases where private limited NBFCs registered with RBI were found to be involved in unethical/fraudulent practices	Action taken in this regard
Gujarat	Deep Capital Services Private Ltd. Company was involved with Jai Khodiyar Mirta Mandal (JKMM), an Unincorporated Body (UIB), which was involved in illegal collection of money	CoR of company was cancelled and winding up petition has been initiated against the company.  Also FIR is filed against the company
Assam	YVU Financial Services Pvt. Ltd. violated directions relating to collection of insurance premium at flat rate and charged a high rate of interest as compared to the prevalent market rates.	YVU Finance Services Pvt. Ltd has been penalized with an amount of Rupees Five lakh on August 08, 2014 by Reserve Bank of India for the violations.

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

Interest rate deregulation: NBFCs must adopt transparent interest rate models and disclose borrower rate gradations. NBFC interest rates are generally deregulated, with a cap only for NBFC MFIs; the RBI's Fair Practices Code requires NBFC Boards to adopt an interest rate model based on cost of funds, margin and risk premium, determine borrower category rates, and disclose the rationale and gradations of risk to borrowers in the application form and sanction letter to ensure transparency.