43114 - Apollo

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Summary of Investment Information

Project Number

43114

Company Name

NAVI TECHNOLOGIES PVT. LTD.

Date SPI Disclosed

Jan 8, 2020

Country

India

Region

South Asia

Projected Board Date

Feb 15, 2020

Environmental Category

FI-2 - Limited

Status

Pending Approval

Last Updated Date

Jun 4, 2022

Department

Regional Industry - FIG Asia & Pac

Industry

Financial Markets

Sector

Other Non-Banking Financial Institution (NBFI)

Project Description

The proposed investment comprises an equity investment in Navi Technologies Private Limited (NAVI or the Company). NAVI is in the process of acquiring 100% ownership over the shares of Chaitanya Rural Intermediation Development Services Private Limited (CRIDS) from Sachin Bansal and existing investors; and an application has been submitted to the Reserve Bank of India (RBI).

CRIDS has a wholly owned subsidiary Chaitanya India Fin Credit Private Limited (CIFCPL). CRIDS and CIFCPL are collectively referred to as Chaitanya. Chaitanya presently provides loans to low income customers in rural areas largely on the joint-liability-group lending (JLG) model.

CIFCPL has made an application to the RBI for a universal banking license under the RBI’s On-Tap Banking License Guidelines, 2016. IFC’s investment in NAVI is to support the transformation of CIFCPL into a technology led universal bank or NAVI Bank (the Project) which would provide mass market banking solutions for individual and micro, small and medium enterprises (MSME) and select corporates.

Associated Advisory Engagement

Sponsor / Cost / Location

Development Impact

1. Improved access to finance for MSMEs and individuals: NAVI Bank will seek to leverage technology platform and data analytics to simplify loan application processes and tailor loan terms to individual and MSME. 2. Improved access of deposit and quality of deposit accounts: NAVI Bank aims to rapidly scale and achieve higher usage and deposit rates by delivering better terms, convenient and tailored product offerings to individual customers and MSMEs compared to incumbent financial institutions by leveraging digital channels and a more efficient business model. 3. Market Competitiveness: NAVI Bank will contribute to fostering competitiveness in the market by demonstrating the viability of product and service innovations delivered through a technology-based business model. IFC expects that New Bank's success will contribute to increasing competitiveness in the retail and MSME banking segments in India, by leading incumbents to invest in technology-driven products for customer engagement and financial service provision, as well as by serving as a catalyst for the entry and growth of new digital banking models in the country.

1. Risk mitigation, including trusted partnerships: As a reputed investor with a strong footprint in financial services and financial technology across emerging markets, particularly in India, IFC's participation in the capital base and governance of the New Bank will provide comfort to stakeholders of the proposed bank in terms of the strength of the Bank's business plan and future management team, the implementation of corporate governance standards, adherence to responsible finance principles, as well as the ability of the Bank to access patient capital to support its growth. IFC will leverage its global experience and know-how in setting up of greenfield institutions, fintech investments, as well as its extensive experience in micro, small and medium enterprises (MSME) finance to support management in key strategic decisions. 2. Standard setting: IFC will assist and advise the NAVI Bank in adopting international best practices in corporate governance (CG), and environmental and social (E&S) policies and processes. As the New Bank will be developing these standards anew, IFC's presence will ensure the implementation of these international best practice standards as a condition for IFC's participation in the venture.

E&S Category Rationale / Risks and Mitigation

The project entails an IFC’s equity investment in a technology company NAVI. The Company plans to launch a technology driven bank offering banking and financial products to the underserved retail and MSME/SME market segments. CIFCPL has applied for universal banking license and upon receipt of license, the current lending operations of CRIDS and CIFCPL will be transferred into the new Bank and CRIDS and Navi Technologies will merge with CIFCPL. The merged entity will continue to provide IT services to the bank. A non-operating financial holding company will be introduced under the merged entity (to comply with central bank’s guidelines) and the bank will become a subsidiary of the non-operating financial holding company. The current lending business of CRIDS is concentrated in priority lending segments and the loan products include small business loans (shops, eateries, trading), livestock and agri loans, two-wheeler, education and housing loans. The lending operations of CIFCPL involve microlending primarily under the JLG model. The new bank (NAVI Bank) is proposed as a digital-led bank which will primarily focus on lending to the individuals, MSME sector and small corporates in the initial 5-7 years of operations. Proposed loan products include personal loans, vehicles loans, home loans, gold loans, microfinance, working capital loans, bank guarantee (selective issuance), letter of credit etc. The bank is not expected to lend to large corporates or support project finance in higher risk business activities that could involve significant occupational health and safety risks or impacts on the environment, community health and safety, biodiversity, cultural heritage, involuntary resettlement or risk of adverse impacts on indigenous peoples. The bank and any other entities under the holding company will not invest in any coal related activities. Hence, the E&S risk of the proposed investment is medium, and the project is categorized as FI-2. The applicable Performance requirements will be i) the IFC- FI Exclusion List; and ii) The host country E&S laws and regulations.

The key E&S risks and impacts derive from the current lending operations of CIFCPL which is in microfinance segment. Future E&S risk will arise from the new bank’s capacity to manage the potential environmental and social risks associated with its operations. Given the business strategy and proposed loan products to low-medium risk MSME segment, the typical risks and impacts will be limited and site specific (e.g. related to occupational health & safety, emergency response, waste-water discharge, air emissions, labour, etc.). At present, the company does not have any E&S risk management system (ESMS) and staff nominated to address E&S risks. As part of this investment, the investee entities will be required to develop and implement an ESMS commensurate to the risk profile of its lending operations. The company will also ensure adequate E&S staffing and capacity is put in place. CRIDS has adequate HR policies in line with IFC Performance Standard - 2 requirements. The bank will ensure that the upgrades are in line with IFC Performance Standard -2 requirements.

Contacts

For Inquiries About the Project, Contact

Navi Technologies Private Limited
Ankit Agarwal
CFO

Ankit.agarwal@navi.com
93, 5th A Block, Koramangala Ind LayoutBangalore KA 560095
www.navi.com

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Task Title & Description	Anticipated Completion Date
Nominate officers	04/04/2020
Establish SEMS	06/03/2020

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