Navi Chairman Sachin Bansal's dream of making the company a banking entity has been brought to a halt after the Reserve Bank of India (RBI) said it found the company's subsidiary unsuitable for a universal banking licence.
The announcement from the RBI came when Bansal was addressing a press conference to announce the company's maiden issue of Non-Convertible Debentures (NCDs). Bansal said it was not the end of the road and the company would also consider appealing RBI's decision.
"We haven't received written communication from RBI yet. We are going to look at it once we get it, and then chart the next course of action. There are lots of options in front of us. It is not the end of the road for us. I mean, there are many things to explore including re-applying," he said.
"We have to go back and analyse this. We will consider whether we want to appeal this and weigh our options."
RBI said Navi Technologies' subsidiary Chaitanya India Fin Credit was found to not suitable for the universal banking licence along with three other applicants.
Navi, which is looking to go public, filed its draft papers with the Securities and Exchange Board of India (SEBI) in March.
One of the reasons for the company’s licence to be rejected could be that it did not meet RBI’s “fit and proper” criteria, owing to a number of ongoing litigations against Bansal.
Bansal, who founded Flipkart with Binny Bansal, was issued a notice by the Enforcement Directorate (ED) in June 2021 for alleged violation of regulations under the Foreign Exchange Management Act (FEMA).
A report by news agency Reuters last year said the ED sought an explanation as to why the company and its founders should not be charged a penalty of more than Rs 10,000 crore for the alleged violations.
Bansal moved the Madras High Court, seeking the quashing of the notice and the complaint filed by ED. His petition is pending before the court and no steps have been taken by the ED following the notice.
Besides the ED notice, there are six cases being heard against Bansal in various courts across in the country. These cases, filed between 2015 and 2021, are due to his association with Flipkart as co-founder.
Navi was also in the line of fire for revealing permanent account numbers (PANs) details of customers in its communicationsat a time when the RBI has been warning of frauds in digital lending and KYC norms.
Meanwhile, the company is planning on raising up to Rs 600 crore from the issue of NCDs amid the slowdown in stock market momentum and investor interest.
The company's Head of Lending, Shobhit Agarwal said while addressing the media on why the company is issuing NCDs, "We are working on diversifying and on the quality of our borrowing. We want to raise money through public debt because that will go a long way in giving comfort to our institutional lenders as well."
Bansal founded Navi Technologies just six months after quitting his first venture Flipkart in 2018, which was bought by American firm Walmart for $16 billion in the same year.
In an interview to Moneycontrol on September 2, 2021, Bansal had said he compares Navi (short for ‘navigator’) to banks and NBFCs.
“We are trying to work backwards and see what a bank for a billion people looks like. It has to be a lot more automated, things have to be a lot more simple, users should be able to help themselves. Banking should be as easy as going on Swiggy and ordering food,” he said.
In preparation for the company’s initial pubic offering (IPO), Navi Technologies has appointed four independent directors to its board, including Meesho co-founder Vidit Aatrey and WhatsApp India’s head Abhijit Bose.
With Aatrey’s appointment on May 12, the independent directors now form a majority on Navi’s Board.
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