Why Flipkart Founder Sachin Bansal's Navi App Cannot Disburse Loans From October 21? Find Out!

In a big blow to Flipkart founder Sachin Bansal, the Reserve Bank of India has banned his digital lending platform, Navi Finserv Limited from disbursing loans which will come into effect from October 21. The reason behind the ban is due to concern related to the pricing policy of these companies in terms of their lending rates, which are found to be excessive.

Navi Finserv along with three other financial services providers such as Asirvad Micro Finance, Arohan Financial Services, and DMI Finance are directed to cease and desist from sanction and disbursal of loans, effective from the close of business of October 21, 2024.

In its statement, RBI said, this action is based on material supervisory concerns observed in the Pricing Policy of these companies in terms of their Weighted Average Lending Rate (WALR) and the Interest Spread charged over their cost of funds, which are found to be excessive and not in adherence with the regulations.

"These are also found to be not in conformity with the provisions laid down under the Fair Practices Code issued by the Reserve Bank," said the central bank.

Bansal's Navi has witnessed a significant turnaround, and emerged as one of the fastest-growing financial services companies in India providing Personal & Home Loans, UPI, Insurance, Mutual Funds, and Gold.

RBI has said that these business restrictions have been made effective from the close of business on October 21, 2024, to facilitate closure of transactions in the pipeline, if any.

Also, RBI highlighted that these business restrictions do not preclude these companies from servicing their existing customers and carrying out collection and recovery processes in accordance with the extant regulatory guidelines.

It added, "These business restrictions will be reviewed upon receipt of confirmation from the companies regarding suitable remedial action having been taken to adhere to the regulatory guidelines at all times, more particularly their pricing policy, risk management processes, customer service and grievance redressal aspects, to the satisfaction of the Reserve Bank."

Notably, RBI has observed that unfair and usurious practices continued to be seen during the course of onsite examinations as well as from the data collected and analysed offsite.

Additionally, RBI also takes note that these NBFCs were variously found to be in non-adherence with the regulatory guidelines on assessment of household income and consideration of existing/proposed monthly repayment obligations in respect of their microfinance loans.

RBI further observed deviations with respect to Income Recognition & Asset Classification (IR&AC) norms resulting in the evergreening of loans, the conduct of gold loan portfolios, mandated disclosure requirements on interest rates and fees, outsourcing of core financial services, etc.

RBI has been taking various measures and scrutiny in sensitising its Regulated Entities through various channels over the past few years.

The action is to ensure that these regulated entities use regulatory freedom responsibly and fairly, along with reasonable and transparent pricing, especially for small-value loans.