IndusInd Bank slumped 10.52% to Rs 1063.70 after media reports suggested that whistle blowers had raised loan evergreening issue at the bank's microlending arm Bharat Financial Inclusion (BFIL).
A group of senior officials at Bharat Financial have reported alerted the Reserve Bank of India and the board of IndusInd Bank of the misgovernance and lapse of accounting norms to evergreen loans since the outbreak of the COVID-19 pandemic, reports said.
Acting as whistle blowers, the officials warned that if the practice of adjusting new loan money with overdues from earlier loans" is not checked immediately, the fault in the subsidiary would eat into the financials of the parent, media reports said.
IndusInd had acquired the micro-finance lender BFIL - formerly SKS Microfinance - in a stock deal in March 2019.
An official of a PR agency hired by the bank has reportedly said, "The bank has received complaint from anonymous person(s). The bank has a well-established policy to deal with such matters and the veracity of the allegations/complaints are being assessed. While management review is in progress, the bank has yet not come across any material findings that warrant immediate action on any count (sic)."
In an exchange filing made on Saturday (6 November 2021), IndusInd Bank said that the allegations made by certain anonymous individuals purportedly acting as whistle blowers are grossly inaccurate and baseless.
The private lender said that all loan products managed by BFIL in the capacity of a Business Correspondent, are approved by IndusInd Bank and are fully compliant with extant regulatory guidelines, issued from time to time.
BFIL has an executive level Risk Management Committee which meets every month. This committee was put in place immediately after the merger, the bank added.
"The bank strongly denies the allegations of 'evergreening'. 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, IndusInd Bank said.
The NPA recognition process runs on a daily basis; the data from BFIL system flows directly to the centralized NPA system of the Bank, without any manual intervention, it added.
The bank further said that 82% of the BFIL serviced customers are in rural and deep rural India where the access to banking services is limited. This issue further got aggravated owing to operational issues arising out of the COVID-19 pandemic including lockdown, containment zones, and restrictions at the village/panchayat level, and necessitated disbursement of some loans in cash.
All loans disbursed by BFIL are through biometric authorisation of the customers. In October 2021, nearly 100% of the loan disbursements were in the bank accounts of the customers, as in pre-COVID time.
However, due to a technical glitch in May 2021, nearly 84,000 loans were disbursed without the customer consent getting recorded at the time of loan disbursement. This issue was highlighted by the field staff within two days and the technical glitch was rectified expeditiously. Out of the above, only 26,073 clients were active with the loan outstanding at Rs 34 crore, which is 0.12% of the September-end portfolio. The bank carries necessary provision against his portfolio.
The standard operating procedure has since been revised to make biometric authorization compulsory, the private lender said.
IndusInd Bank further informed that an independent review has been initiated by the bank to see if there is any process lapse or accounting failure at BFIL. Should there be any need, the bank will immediately take corrective action as appropriate and keep all the stakeholders adequately informed.
IndusInd Bank caters to both consumer and corporate customers. The private bank's standalone net profit surged 72% to Rs 1113.53 crore on an 8.6% increase in total income to Rs 9487.56 crore in Q2 FY22 over Q2 FY21.
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