How lenders like Navi resort to extreme borrower surveillance to keep their A game on

**Snigdha Sharma** (0:04)
If you've ever taken a loan from a non-bank or an NBFC, the EMI is usually auto-debit from your account every month. But if you miss a payment, you know what usually goes down. You're inundated with phone calls from your lender, and maybe agents even start visiting your house. Not an ideal situation for you or for your lender. But now, your lender can just monitor your account and deduct the money as soon as it comes into it. All thanks to the auto-debit permission that you granted. You see, earlier, only a bank could do this when it lent money to its account holder. But now, non-banks can do it too. A fintech executive told the Ken that this tool will soon become business as usual in every lender's toolbox. But things are still not there yet since the banks are not predictably sharing the statement data or their servers are down. And here is where account aggregators come into the picture. These aggregators are a newly created class of licensed companies by the Reserve Bank of India. They basically help businesses exchange financial information about a user after taking the user's consent. Like Navi Finserv, a 4-year-old non-bank was quite particular about how fast it could help its users take out a loan. Navi's co-founder and CEO, Sachin Bansal, who previously co-founded Flipkart, believes that banking should be as easy as going on Swiggy and ordering food. So to amp up both dispersals and collections, Navi and others like it started counting on account aggregators. But being able to access a borrower's bank statement at any given time is a really powerful collection tool. And the problem was how Navi had been using this power. In fact, just last month, the RBI banned Navi from dispersing any new loans. The reason was not this, but the banking regulator cited unfair lending practices, which included high interest rates, unfair and hidden charges and evergreening of loans. So in this episode, we dig deeper into how Navi has been using this data from its loan customers. Welcome to Daybreak, a business podcast from The Ken. I'm your host, Snigdha Sharma, and I don't chase the news cycle. Instead, every day of the week, my colleague Rahel Philipose and I will come to you with one business story that is worth understanding and worth your time. Today is Thursday, 21st November.
To make loans easy and quick, Navi wants access to some of its borrower's bank statements, which sounds fair until you find out that they want this access on an everyday basis. This is way more than what other lenders have been asking for, more than what is recommended. In fact, it is more than what is really necessary for monitoring loans, and it does come across as a bit aggressive to many. But for Sachin Bansal, it is plain ambition, especially after Navi was denied a banking license by the Reserve Bank of India. Also, not to forget the failed IPO. He has a point to prove. So he's tweaking, fussing, experimenting and doubling down on any metric that has the potential to grow. Anything that will take the company to grow from its $1.3 billion plus loan book of mostly personal loans. And for this, Navi is counting on account aggregators. Since these aggregators went live back in 2021, they saw very slow growth. But lately, they seem to have started picking up with more than 500 financial institutions becoming a part of it. In June 2024, a total of 16 aggregators, which includes the likes of One Money and Anumati, generated over 88 million consents from borrowers on behalf of various financial institutions such as lenders, personal finance management companies and investment advisors. This was seven times more compared to last year. Lenders like Bajaj Finance, HDFC Bank and IIFL are of course, among the top users of these account aggregators because of their size. But Navi, despite having a much smaller loan book comparatively, also sits among the top five users of these aggregators. If you look at the consent form for a loan on Navi, you will see that Navi seeks to keep your bank statement data for as long as eight years when you are applying for a loan. And if you do get a loan, it wants to monitor it every single day for those eight years. A senior account aggregator executive told my colleague, Arundhati Ramanathan, that this is just excessive. Another even went a step ahead and called it unethical. They said, just because someone needs money, lenders are exploiting them by taking more data than they need. A former Navi employee told us that lenders can also get away with it easily because most borrowers just want a loan. They don't care about permissions that are being sought or what they do with the data. Now, Navi's overuse of this tool to hoard data is actually etched into its DNA. Details on collections, disbursals, costs, efficiency and more hit the Slack channel every morning at half past five. Within an hour, Sachin Bansal is already looking for answers and hunting down drop-off rates at every step. Things move really quickly in the company. A former employee told us that saying no is not an option to Sachin. If you say something will need five weeks to complete, he will push for it to be done in two weeks. He believes in putting everything behind it. This high-pressure environment at Navi makes sense when you think about how Bansal who owns 97% stake in the company has pumped in nearly $500 million of the money from his 2018 Flipkart exit into it. The idea was for a stock market debut and a banking license. That way, the non-bank could have raised funds through public markets and also gained access to low-cost deposits. Both of these plans failed. DMOT is synonymous with discounts. Its stores are packed on most weekends like there is a festival going on. But despite all of this, the listed company has been in a bit of a slumber for some time now. So, my colleagues Rohin Dharmakumar and Praveen Gopalakrishnan decided to investigate the forces that are making DMOT take a pause and decide what its strategy is to defend its position. Stay tuned to hear what they and their really interesting guests had to say at the end of this episode. And now back to Daybreak.