The RBI said that its order on Navi Finserv, DMI Finance, Arohan Financial Services and Asirvad Micro Finance would come into effect from the close of business on October 21
The RBI’s action is in response to excessive interest rates and non-compliance with its regulations. The NBFCs were found to have pricing policies that violated RBI guidelines
The business freeze will remain until Navi Finserv and the other firms take corrective actions to the satisfaction of the RBI
The Reserve Bank of India (RBI) has directed Sachin Bansal’s Navi Finserv and three other non-banking financial companies (NBFCs) to immediately stop sanctioning and disbursing loans due to supervisory concerns.
Citing material supervisory concerns, the RBI said that its order on Navi Finserv, DMI Finance, Arohan Financial Services and Asirvad Micro Finance would come into effect from the close of business on October 21.
The RBI’s action is in response to excessive interest rates and non-compliance with its regulations. The NBFCs were found to have pricing policies that violated RBI guidelines.
“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…,” the central bank said in a statement.
Additionally, the NBFCs were flagged for discrepancies in assessing household incomes and ensuring appropriate loan repayment terms.
Other concerns included irregularities in loan classification, outsourcing financial services, and inadequate disclosure of interest rates and fees.
The RBI emphasised that the restrictions will not affect existing loan servicing or collections but aim to ensure regulatory compliance.
Notably, the business freeze will remain until Navi and the other firms take corrective actions to the satisfaction of the RBI.
“Navi Finserv Limited is committed to conducting its business operations with the highest standards of compliance, customer service, and transparency,” the company said in an official statement.
“The company is reviewing the directions received from the Hon’ble Reserve Bank of India and will work with them, and address all the concerns raised with promptness and completeness,” it further added.
The update comes as Navi chief Bansal has been vocal on ‘Credit Line on UPI’. It recently launched the service in partnership with Karnataka Bank.
The fintech unicorn recently closed a $24.5 Mn (about INR 206 Cr) business loan securitisation deal with Goldman Sachs. Before this, it also made a similar deal with lending tech startup Aye Finance of INR 212 Cr (over $25 Mn), in late August, to fuel expansion of the company’s lending operations to micro enterprises across the country.
Meanwhile on the UPI transactions front, Navi has been growing exponentially. The company passed Axis Bank in terms of total number of UPI transactions in September – grabbing the fifth spot on the list.
The startup processed 120.41 Mn transactions in September, up 35.74% from 88.7 Mn transactions in August. According to the National Payments Corporation of India’s (NPCI) data, the value of Navi’s UPI transactions in September stood at INR 6,549 Cr.
Financially, Navi reported its consolidated operating revenue at INR 1,906.2 Cr in FY24, up from the FY23 figure of INR 1,283 Cr – excluding Chaitanya India. However, the consolidated profit after tax (PAT) from continued operations slipped 56% year-on-year (YoY) to INR 115.6 Cr in FY24.
