An NBFC licence would allow fintechs to offer loans from their own books, thereby build an asset base. Without this licence, they remain confined as marketplaces to source loans for banks and other NBFCs.
“The RBI wants to give the lending licence to profitable and clean companies, but many fintechs do not meet both criteria,” said a senior banker in the know of things.
After the Reserve Bank of India blocked the attempts of OneCard and Uni to get the NBFC licence, another neo-banking fintech, Fi, too is understood to have failed to get the permit recently.
Emailed queries to Fi founder Sujith Narayanan remained unanswered at press time Friday.
Industry insiders ET spoke with pointed out that after Cred, BharatPe and Jupiter got NBFC licences, many fintechs were hopeful of getting one too. But the regulator has “returned” a bunch of applications recently, indicating that it will not free up licences easily.
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Data from the Reserve Bank of India show that in FY2021-22, only 44 new NBFC applications were granted. In the previous two years, the numbers were 55 and 116.The regulator is also scrutinising the companies closely. The Mint newspaper wrote on Friday that the RBI rejected Cred’s application to increase its stake in Kunal Shah-promoted NBFC Newtap Technologies. Shah is also the promoter of Cred.
Challenges for fintechs
Most of the fintechs are lossmaking, which is a major criteria considered by the regulator before giving out a licence, the banker cited earlier said.
“The regulator usually does not reject an application; it mostly returns the licence with additional queries,” said another senior banker in the know.
But if an application is returned, chances are low that it will clear the second time, he added.
The RBI is not in favour of licence shopping. There are 9,640 NBFCs in the country, a major chunk of whom are lying dormant. Fintechs are looking for such dormant NBFCs and are trying to acquire them. The RBI is not clearing such deals.
ET wrote on August 16 that OneCard was looking to acquire an NBFC, but the application has not gone through.
The thinking in the RBI is that if an NBFC has not been operational, it should rather close down and return the licence instead of looking for a strategic buyer.
Another aspect that the regulator is checking is to find out the “ultimate beneficiary”. Most of these fintechs are backed by large venture firms. These firms have complex structures where finding out the ultimate source of the capital is a big challenge. The RBI is not keen on such applications, ET has learnt.
“The RBI is asking for details of the limited partners, the ultimate investors in the fund and if they are using any of the suspicious funding routes through tax havens then they will further stay away from granting a licence,” one of the bankers said.