Navi Finserv and DMI Finance are among the four firms banned, with Asirvad Micro Finance and Arohan Financial also included.
The RBI cited steep pricing, excessive interest rates, and poor borrower evaluation as key reasons for the action.
The companies violated regulations on pricing policies, income assessment, and interest rate disclosures, leading to RBI intervention.
The restrictions prevent new loans, but existing customer servicing and recovery processes can continue under regulations.
The banned firms must submit remedial actions to the RBI for review, potentially lifting the restrictions once concerns are addressed.