In an interaction with ET, Bansal said he thought most in government and the regulator would agree that there is now a case for modern banks in India.
Bansal’s comments come after the RBI rejected Navi’s banking license application, along with those of other applicants, in May this year. Navi Technologies had applied for the license through the group company Chaitanya India Fin Credit.
According to people familiar with the group’s thinking, the company will first assess whether the regulator is open to new entrants into the banking industry before reapplying for a license.
Bansal, who co-founded Flipkart, was speaking out for the first time since the banking regulator denied him permission to set up a bank.
“The United States has thousands of banks and India has more people. We need more modern banks – there is a case for that and most people will agree with that. You can’t build an advanced economy based solely on a handful of banks, which are traditional,” he said.
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“You need modern thinking and institutions that have been around for decades cannot change overnight. There is definitely a need (to have more banks) and I hope the regulator will see that…they find a way to act on it…it will be good for India,” he said.
Its non-banking and finance company (NBFC), Navi Finserv, reported an initial profit of Rs 22.9 crore for the quarter ended June, according to company filings. It had recorded a net loss of Rs 4.3 crore for the fiscal fourth quarter ended March 31, 2022. For the last financial year, it had recorded a net loss of around Rs 67 crore.
According to the 41-year-old entrepreneur, the banking license remains a long-term ambition and he is keeping all options open.
“When we are about to re-apply, of course we will re-evaluate the whole thing from scratch and it will be a new application,” Bansal said.
Although the RBI did not disclose the reasons for the rejection of Bansal’s application in May, the contractor received a notice from the Directorate of Enforcement (ED) for alleged violation of the guidelines of the Law Enforcement Act. exchange management during his move to Flipkart. The case was linked to a seller company, WS Retail, on the Flipkart platform.
Bansal and his Flipkart co-founder, Binny Bansal, had set up WS Retail in 2009 and had a stake in the business, but sold it in 2012. In September last year, Bansal moved the Madras High Court against the actions of the ED following the ED notice around August last year. . ED’s probe covers WS Retail’s relationship with Flipkart during the period 2009-2015.
IPO in progress
Bansal’s Navi, which filed its draft prospectus in March for an initial public offering of Rs 3,350 crore, is keen to go public as soon as possible but will take advice from its bankers before going any further amid changes in the market sentiments towards IPOs. Market regulator Securities and Exchange Board of India has yet to approve Navi’s IPO proposal, but Bansal’s Navi is believed to be in active contact with the regulator over the proposal.
“…it’s just that when the market timing is right and the advisors sense it, we’ll go public. The company would like to (go public) this exercise but it also depends on the bankers and their level of confidence,” Bansal said, speaking to ET in his office in Bengaluru.
On the NBFC branch recording a profit, Bansal said it demonstrated that consumer-first principles can be used to build a profitable business.
“Because I come from an internet background, people think of internet companies as machines that burn money (laughs) and don’t generate profits – in general. That’s the mindset I don’t think a consumer internet business is trying to be profitable in the first couple of years,” he said.
Bullish on loans
Navi Finserv’s operating revenue in the June quarter jumped to over Rs 184 crore from around Rs 141 crore in the previous quarter, an increase of 31%. Chaitanya India Fin Credit’s microfinance business is a subsidiary of Navi Finserv, but reported figures do not include it.
“As monthly installment payments (EMIs) become more equal, our models are able to make better decisions and approve more customers. It also contributes to better conversion rates and lower cost of credit and provisioning for Navi Finserv,” Bansal said.
According to knowledgeable people, one of his biggest sources of expenses for the business was marketing and this has now decreased with the increase in organic traffic to the platform.
“Navi has also made significant investments in collections capabilities, underwriting, loan sizing, and low-cost and organic customer acquisition channels, which is significantly boosting Navi Finserv’s business,” Bansal said. .
Currently, Navi Finserv is witnessing the creation of nearly one million EMIs by borrowers on the platform. The company also finds that 40% of customers receiving a loan on the Navi Finserv platform are repeat customers. She sees repeat customers as the majority for her lending business in the future.
Personal loans from Navi – recently renamed Cash Loan – can range from Rs 20,000 up to Rs 20 lakh for eligible customers.
Currently, Navi Finserv’s business, which includes its cash, home loan and microfinance operations, contributes nearly 80-90% of the group’s quarterly revenue. It also represents almost 78% of the group’s total assets under management.
Asked about recent RBI guidance on digital lending, Bansal said it was good that the regulator clarified the regulatory framework.
“Of course, we have to be more careful in obtaining consent and storing this data. Overall, it’s all good for consumers. When we started in 2018, we made a conscious decision to operate as licensed entities and this is true for our lending, mutual fund and insurance businesses, so we have always wanted to operate within the regulatory framework,” he said.
Navi had come under fire late last year for offering consumer loans by spamming mobile messages with details of PAN cards.