Sachin Bansal, the billionaire owner of Flipkart, who had been planning to take his more recent business, Navi, public, has suffered a significant setback after the Indian central bank denied Chaitanya India Fin Credit’s application to be allowed to operate as a bank. The Reserve Bank of India rejected four applications on Tuesday, including one from Bansal’s Chaitanya (Navi Technologies’ microfinance division), stating that they were “not considered appropriate” for managing full-fledged banks in the second-most populous market in the world.
The judgment made on Tuesday is a serious setback for Bansal, who has been vying for a banking license for years. A license would have given Bansal’s company, which provides consumers with loan and insurance products, a means to strengthen its finances and introduce new items. If Navi had been granted a complete banking license in India, she could have taken deposits from clients and used the money to lend to others. (If not, businesses must search at alternative banks and finance sources, where borrowing money has higher interest fees.)
According to a fintech executive who chose to remain anonymous, a license would have also allowed Navi to introduce its own credit cards and settle foreign transactions. Bansal, who was at a different news conference at the time of the announcement, stated that Navi will assess the central bank’s choice and consider alternatives. Flipkart co-founder Bansal quit the company in 2018 and started Navi the same year. He has positioned Navi as a financial firm that also happens to be tech-savvy.
“We will inquire into the reasoning behind this choice from the RBI. The verdict was “not the end of the road” for the business, he added, adding that “there might be an appeal from us against this decision. Early in 2020, Navi—which earlier this year filed for a $440 million IPO—applied for a banking license. TechCrunch previously claimed that the business had tried to put together a fundraising round earlier with a valuation of over $4 billion and had interacted with a number of investors, including SoftBank. However, the discussions broke down after it was unable to obtain the license.
According to recent local media allegations, Navi has allegedly violated foreign exchange regulations, struggled to uphold effective governance inside the organization, and not managed clients’ sensitive and personal data correctly. UAE Exchange, the Repatriates Cooperative Finance and Development Bank, and a proposal from a former Citibank executive named Pankaj Vaish are the other three businesses that failed to meet the RBI’s criteria for a universal bank license. When it comes to granting banking licenses across the nation, the RBI has been extremely cautious. Only a few businesses, like Bandhan and IDFC First, have operated in the last ten years.