Not End Of The Road, Flipkart Co-Founder Says After RBI Rejects Banking Licence

The Reserve Bank of India (RBI) has rejected applications for ‘on-tap-bank’ licences of six companies including one operated by Flipkart Co-Founder Sachin Bansal. Four of these six companies had applied for Universal Banks and two for Small Finance Banks.

The applications of companies that have been rejected by the RBI include UAE Exchange and Financial Services Limited, The Repatriates Cooperative Finance and Development Bank Limited (REPCO Bank), and Shri Pankaj Vaish and others – all applied for Universal Banks.

Applications of VSoft Technologies Private Limited and Calicut City Service Co-operative Bank Limited, who had applied for Small Finance Banks, have also been rejected.

The bank has also rejected Flipkart founder Sachin Bansal’s Chaitanya India Fin Credit Private Limited which has applied for a universal bank license.

Bansal is the Managing Director (MD) and Chief Executive Officer (CEO) of Chaitanya India Fin. Last year, the Enforcement Directorate served a show-cause notice to Bansal for alleged violation of Foreign Direct Investment(FDI) policy.

“The examination of six applications has now been completed as per the procedure laid down under guidelines. Based on the assessment of the applications six companies were not found suitable for on-tap-banking licence,” RBI said in a statement.

The central bank received a total of 11 applications out of which five are under scrutiny.

Navi Financial Services CEO Bansal, on the sidelines of company’s announcement to raise INR 600 crore through IPO of Non-Convertible Debentures (NCDs) said that they will understand what went wrong this time. He added that RBI will also get back on what the reason for this step was, and then they may consider appealing against the decision.

He further said that it is not the end of the road and they may look at reapplying.

Bansal left e-commerce major Flipkart after it was acquired by American multinational retail giant Walmart in 2018. Since then, he has been keen on getting a bank licence and has put in INR 4,000 crore of his personal capital in Navi Technologies, a financial services company that he established in 2018.

The IPO for Navi Financial Services will open on coming Monday and is scheduled to close on June 10, 2022 with an option of early closure or extension.

Investors get an opportunity to participate in secured NCDs under various series for tenure of 18 months and 27 months with an effective yield of upto 9.80 per cent and a minimum application size of INR 10,000.

Speaking about the NCD issue, Ankit Agarwal, Managing Director of NFS said, “The upcoming NCD issue aims to raise funds for onward lending and financing purposes, This will further diversify our borrowing profile and add more retail investors to our portfolio to complement our wide base of Institutional partners. This is a secured instrument with a (stable) rating, a low application size and an effective yield of upto 9.80 per cent.”

NFS offers personal loans and home loans under the “Navi” brand and the company has approved personal loans to customers across over 84 per cent of all Indian pin codes. The Company’s net worth stood at INR 1,189.57Crores  as on December 31, 2021 and maintained a comfortable standalone debt to equity ratio of 2.1x as on December 31, 2021.

The fintech company has maintained a strong asset quality reflected by its Net Non-Performing Asset (NPA) of 0.08 per cent which is supported by a collections efficiency of 96.63 per cent.

Its outstanding borrowings on a standalone basis of INR 2,774.97 Crores as of March 31, 2022 was diversified across an array of instruments such as NCDs, sub-debt, term loans, market linked debentures, commercial papers and, securitisation instruments.