Navi Finserv cancels Rs 100 cr bond issuance plan after RBI action

The central bank had last week barred the NBFC from sanctioning and disbursing additional loans for charging exorbitant interest rates

This report has been updated
 

Bengaluru-based non-banking finance company (NBFC) Navi Finserv has cancelled its planned bond issuance of Rs 100 crore, which was scheduled for bidding on Monday, two sources privy to the development said. 

Sachin Bansal-backed Navi Finserv was planning to raise Rs 100 crore through the domestic debt capital market with bonds that had a tenor of 27 months. These bonds were rated 'A' by the domestic rating agency CRISIL.

The move comes just a week after the Reserve Bank of India (RBI) barred Navi Finserv and three other NBFCs including two microfinance institutions (MFIs), from sanctioning and disbursing loans for charging exorbitant interest rates to the borrowers.

 

The other three entities are Asirvad Microfinance, Arohan Financial Services (also an MFI), and DMI Finance, which provides personal, consumption, and micro, small and medium enterprises loans.

Shobhit Agarwal, Head of Lending, Navi Finserv said, “Navi Finserv maintains a healthy liquidity position, and after careful consideration, we determined that there was no immediate need for external funding at this point, leading to this development.”

Navi Finserv is a digital-first NBFC, which offers personal and home loans. The company also caters to emergency medical expenses and short-term business needs. The firm is backed by Sachin Bansal, co-founder of e-commerce giant Flipkart.

On its part, Navi had said that it is committed to conducting its business operations with the highest standards of compliance, customer service, and transparency.

“The company is reviewing the directions received from the honourable RBI and will work with them, and address all the concerns raised with promptness and completeness,” it had said.

In the monetary policy statement on October 8, RBI Governor Shaktikanta Das had cautioned NBFCs, including MFIs, about prioritising excessive equity returns. He expressed concern over exorbitant interest rates coupled with high processing fees and frivolous penalties.

In its release barring the four NBFCs, the RBI stated that over the last few months, it had been sensitising its regulated entities through various channels on the need to use their regulatory freedom responsibly and ensure fair, reasonable and transparent pricing, especially for small value loans.

“However, unfair and usurious practices continued to be seen during the course of onsite examinations as well as from the data collected and analysed offsite,” the central bank said.

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. 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, the RBI said in its release.

“The 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 RBI,” the central bank has highlighted.