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MUMBAI : The Reserve bank of India (RBI) on Tuesday said that it has rejected six applications of licenses to set small and universal bank licenses after finding them unsuitable..

Bansal’s firm Chaitanya India Fin Credit Pvt. Ltd was among 11 applications for setting up a bank under the RBI guidelines for on-tap licensing of universal banks and small finance banks.

The five other applications that were also rejected by the central bank are UAE Exchange and Financial Services Ltd, REPCO Bank and a consortium led by former Citibank employee Pankaj Vaish. For small finance bank licence, RBI has found unsuitable applications of VSoft Technologies Pvt. Ltd and Calicut City Service Co-operative Bank.

Five applications are under consideration, the regulator said in a statement. These are Cosmea Financial Holdings Pvt. Ltd, Tally Solutions Pvt. Ltd, West End Housing Finance Ltd, Akhil Kumar Gupta and Dvara Kshetriya Gramin Financial Services Pvt. Ltd, all being considered for small finance Bank licences.

Commenting on the central bank’s decision, Bansal said, “We will ask RBI why this decision. And, there will be appeal from us on this. Lot of options are in front of us. We can even look at reapplying. We have to wait for RBI’s written response."

Bansal was addressing a press conference on Chaitanya India’s upcoming public issue of non-convertible debentures.

While RBI has not made its reasons clear on the rejection of Bansal’s application, it is possible that the regulator took into consideration an enforcement directorate notice issued against the Flipkart founder in July last year. The government’s financial investigation unit had asked Flipkart, its early investors and co-founders Sachin Bansal and Binny Bansal, to explain why they shouldn’t face a penalty of 10,600 crore for alleged violations of several sections of the Foreign Exchange Management Act.

On 17 August 2021, Mint had also reported that this notice could dampen Bansal’s chances of getting a licence as the regulator seeks clearances from all government agencies under fit-and-proper criteria. In September last year, Bansal challenged the show cause notice in the Madras High Court.

Bansal, who co-founded Navi Technologies with Ankit Agarwal after leaving Flipkart, is looking to build a financial services platform that offers loans, insurance, and mutual funds. Towards this goal, he acquired microlender Chaitanya India Fin Credit for 739 crore in September 2019.

Navi is also preparing for a 3,350 crore public listing and the company has filed draft papers with market regulator Sebi.

The capital raised will help Navi meet RBI norms for non-banking finance companies (NBFCs) on capital adequacy and solvency capital.

The decision to reject these applications was taken by a standing external advisory committee (SEAC) headed by former deputy governor Shyamala Gopinath. The committee was set up by RBI last May to screen applications for universal banks and SFBs after the regulator first vets the proposal. RBI had released the guidelines for ‘on tap’ licensing of universal banks in the private sector in August 2016 and on tap licensing norms for small finance banks in December 2019.

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