MUMBAI (CU)_Last month, the Reserve Bank of Indi (RBI) and the board of IndusInd Bank received multiple emails from a whistle-blower group, which accused the latter of evergreening loans, under-reporting non-performing assets and inflating revenues. However, these allegations were denied by the Mumbai-based commercial banking company, which admitted that nearly 84,000 loans were disbursed by its micro-finance arm without the consent of the customers.
According to the bank, the event, which took place on 21 May, was a result of a “technical glitch” and therefore, an independent review has been initiated in order to determine if there has been any process lapse or accounting failure at its wholly-owned micro-lending subsidiary, Bharat Financial Inclusion (BFIL). “The Bank wishes to reiterate that there is a strong risk management and control framework in place, both within the Bank and at BFIL,” IndusInd said in a statement on Saturday (6 November).
The allegations made by the whistle-blower group, comprising of officials of the BFIL, follows a resignation letter submitted by former BFIL vice-chairman M R Rao, in which he made similar allegations, saying the loans that were disbursed without customer consent appeared to be a “deliberate attempt to shore up repayments”, instead of resulting from a “process lapse”.
Nevertheless, IndusInd insists that that the event in May was a result of a technical glitch was rectified “expeditiously”. “Out of the above, only 26,073 clients were active with the loan outstanding at ₹340 million (US$ 4.59 million), which is 0.12% of the September end portfolio. The bank carries necessary provision against this portfolio. The standard operating procedure (SOP) has since been revised to make biometric authorisation compulsory,” the banks’ statement read.
It went on to deny evergreening its loans, noting that funds that have been lent by its subsidiary were not in violation of regulatory guidelines.
“All the loans originated and managed by BFIL, including during the COVID period which saw the first and second waves ravaging the countryside, are fully-compliant with the regulatory guidelines,” the Mumbai-based financial service provider noted. “During the pandemic, the customers faced operational difficulties and some have turned intermittent payers, though a large part of them demonstrated a strong intent to repay on many occasions. Basis the requirements, the Bank adopted a multi-pronged approach depending upon the need of the client.”
