Why RBI has barred Sachin Bansal's Navi Finserv from lending
What's the story
The Reserve Bank of India (RBI) has cracked the whip on Flipkart founder Sachin Bansal's Bengaluru-based non-bank lender Navi Finserv. The regulator issued an order, directing Navi and three other non-bank finance companies (NBFCs) to stop lending. The move comes as the firms failed to meet their commitments to the RBI, even as discussions with the central bank were ongoing.
Lending issues
RBI's concerns over lending practices
The RBI's action was mainly driven by concerns over usurious lending practices. These include high interest rates, unfair and concealed fees, and evergreening of loans. Despite Navi's management being open and sincere in their discussions with the regulator, no significant changes were observed on the ground. This lack of progress led to the central bank's decision to halt lending activities.
Regulatory measures
Remedial actions for lifting restrictions
The RBI has said the restrictions can be lifted after remedial actions. However, it is still unclear when that would happen as the companies have to address a number of issues. The central bank's directive is a clear indication of its commitment to ensure fair lending practices in the financial sector.
Drastic step
Bond sale called off
In related news, Navi Finserv has called off its proposed ₹100 crore bond sale amid RBI's scrutiny over its lending practices. The bond sale was scheduled to open for bidding yesterday, and the firm planned to raise ₹100 crore by issuing two-year and three-month bonds.