Navi Finserv Withdraws ₹100 cr Bond Issuance

Sachin Bansal-backed non-banking finance company (NBFC) Navi Finserv has decided to end its planned bond issuance totalling ₹100 crore. This was scheduled to go for bidding on Monday.

The NBFC was planning to raise ₹100 crore via the domestic debt capital market. In this financial market, the company was planning to raise the amount through bonds that had a tenure of 27 months. These bonds were rated 'A' by the domestic rating agency CRISIL.

The development comes following Reserve Bank India’s (RBI) ban on three NBFCs which included Navi Finserv apart from two microfinance institutions (MFIs). The ban pertains to sanctioning and disbursing loans at extraordinary interest rates to the borrowers.

Other 3 entities include Asirvad Microfinance, Arohan Financial Services (also an MFI), and DMI Finance.

As per the recent developments, Navi said that it is committed to conducting its business operations with highest standards of compliance, customer service, and transparency.

It added, “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.”

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.”

Notably, business restrictions will become effective from the closing of business on October 21, 2024. This is being done to facilitate closure of transactions in the pipeline, if any. However, it should be noted that these restrictions do not prevent these companies from carrying out their servicing activities for their existing customers. It also does not bar these companies from carrying out collection and recovery processes, said the RBI in a release.

The central bank said, “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.”

Previously, in a monetary policy statement on October 8, RBI Governor Shaktikanta Das warned NBFCs, including MFIs against unsustainable business practices for pursuing growth. He expressed concerns over excessive interest rates, which were coupled with high processing fees and frivolous penalties.