Navi Finserv wanted to scale up its home loan disbursal to Rs 200 crore a month, back in 2022, but that growth has been elusive, according to three people in the know. Its general insurance business has remained stagnant for a couple of years now, with further slowdown observed this year, they added.
“Navi wanted to build a digital first home loan business, but that has not worked out yet and is operating at a very limited scale,” said one of the people privy to the development.
Responding to ET’s queries, a Navi spokesperson said its home loan business has been on the rise with an increase in demand.
Going forward Navi Finserv might need to rethink its processes to involve more feet on street and physical systems for the home loan business, said the person privy to the development.
He explained that the company wanted to create a bank of pre-approved large housing projects so that customer onboarding could be faster, but that has not worked out fully.
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Bansal founded Navi in 2018 and capitalised the startup with the proceeds from the sale of his stake in Flipkart to Walmart. While Bansal’s banking ambitions came a cropper after the central bank did not give him the licence, he wanted to build a digital first finserv platform offering products across lending to insurance.
ETtechAt the industry level, disbursement of home loans continues to be a physical process with banks and large home finance companies as dominant players. Additionally, with the focus of traditional lenders on secured assets, home loans are being pushed aggressively with attractive interest rates.
“In this market, for a new generation NBFC (non-banking finance company) to disrupt the space could be a big challenge, especially when you cannot compete on rate of interest,” said another person. “Navi’s aims here were very novel but disrupting such a traditional business with technology will take time.”
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The third person said Navi wanted to build processes seamlessly. “For home loans, payments are made in a staggered fashion. In Navi, each disbursement could get fired through a single click on the app. These were small things Bansal added to make the process smooth,” he added.
At the end of the last calendar year, Navi had built a total asset book of Rs 10,500 crore.
All bets are on consumer lending
Currently Navi is building its credit operations mostly on the top of consumer lending, which had grown to Rs 7,774 crore by the end of the June quarter of the current fiscal year.
According to data sourced from credit ratings firm Care Ratings, its personal loan assets grew to Rs 7,774 crore, nearly 16 times from Rs 492 crore in March 2021.
Within this business, the share of personal loans of tenure of more than two years has grown to 74%, compared with 37% two years back. Its credit costs went up to 5.89% in FY23 compared with 3.79% in FY22, Care Ratings observed in a note in September last year.
“Our credit costs have not increased due to our write-off policies. Our credit parameters are improving year on year and quarter on quarter,” the Navi spokesperson said.
“Navi went after consumers with high credit scores but in its quick growth, it stumbled upon non-performing loans too. Hence, to keep the overall numbers under check, its write-off policies have been very aggressive,” said one of the people cited earlier.
Loans get written off when they are not repaid over time and the chances of recovery become slim. For Navi Finserv, loans that are due for more than 90 days are at 1.19%.
Also read | Unsecured loans in focus, fintechs see NBFC credit taps drying up
Slowdown in insurance
In its attempt to build a full-scale financial services gameplan, Navi offers general insurance products as well. According to industry data, Navi’s general insurance premium collection has shrunk over two years now.
Data between April and November of last year show that overall, with health and motor, Navi’s gross written premium fell 14% to Rs 42 crore from Rs 49 crore a year earlier.
Its motor insurance business had shrunk to Rs 4.8 crore from around Rs 23 crore a year earlier. Its health insurance grew to Rs 38 crore from around Rs 26 crore a year earlier.
The Navi spokesperson added that as a new-age, direct-to-customer and fully digital insurer, the company has witnessed year-on-year growth in retail health insurance.
“The slight de-growth in the previous year can be attributed to our intentional defocus on the Motor insurance business in the near term,” he added.