IndusInd Bank Rebuts Allegations Of Evergreening At Bharat Financial Inclusion

IndusInd Bank Ltd. said that a media report on anonymous allegations of evergreening of microfinance loans was "grossly inaccurate and baseless".

The report overlooked factual aspects, the bank said in an exchange filing on Saturday. The bank said all microfinance loans fully comply with regulatory requirements.

The The Economic Times on Nov. 5 reported that a group of people, including senior employees of the IndusInd Bank's arm Bharat Financial Inclusion Ltd., alerted the Reserve Bank of India and the private lender's board about lapses in governance and accounting norms to allegedly evergreen loans running into thousands of crores since the outbreak of Covid-19. Loans were given and adjusted without customer consent, and if unchecked, will impact the bank, it said citing the unnamed people.

The bank denied the allegations and said in its statement:

• All the loans originated and managed by Bharat Financial, including during the Covid period which saw the first and second waves ravaging the countryside, are fully compliant with the regulatory guidelines.

• 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.

• This includes additional liquidity support to the extent of 20% of the outstanding as on Feb. 29, 2020 as applicable under the Emergency Credit Line Guarantee Scheme or restructured loans under applicable regulatory guidelines, including extension of moratorium to help tide over the immediate cash-flow mismatch.

• Additional loan with a longer tenor and lower EWI (equated weekly instalment) were advanced to customers after they cleared arrears and with their due consent.

All the loans follow a weekly repayment model, the bank said. If there is any default, that gets recorded as missed instalments. Given the weekly repayment model, the concept of evergreening is not feasible, it said.

Loan Disbursals

The bank said due to a technical glitch in May, nearly 84,000 loans were disbursed without the customer consent getting recorded at the time. The issue was highlighted by the field staff within two days and the technical glitch was rectified expeditiously, it said. Of these, 26,073 clients were active with the loan outstanding at Rs 34 crore, about 0.12% of the September-end portfolio, it added. The bank carries necessary provision against this portfolio, it said.

Governance

The bank said Bharat Financial has an executive-level risk management committee that meets every month. This committee was put in place immediately after the merger. In June 2021, the lender strengthened the governance framework through a board-approved policy to ensure a cross-functional review of the activities of the microlender, it said.