Tag: BFIL

IndusInd Bank clarifies on appointment of BFIL executives by SSFL, BFSI News, ET BFSI

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IndusInd Bank has clarified that Shalabh Saxena and Ashish Damani are currently employed with its wholly owned subsidiary Bharat Financial Inclusion (BFIL) as managing director & CEO, and Chief Financial Officer, respectively, countering that they have been appointed by Spandana Sphoorty Financial Ltd (SFFL). SFFL on Monday had announced the appointment of Saxena as its MD & CEO, and Damani as the President and CFO of the company.

In a clarification, IndusInd Bank said that “Shalabh Saxena and Ashish Damani are currently employed with bank’s wholly owned subsidiary, Bharat Financial Inclusion (BFFL), in the capacity of the Managing Director & Chief Executive Officer and Executive Director & Chief Financial Officer, respectively”.

“Neither, Shalabh Saxena nor Ashish Damani have tendered their resignation from the services of BFIL,” the bank said.

As per the terms of their employment, once the resignation is tendered, it is subject to acceptance by the board of directors of BFIL (board). Upon acceptance by the board, a specified notice period is also required to be served, IndusInd Bank said in a regulatory filing.

“However, as neither of them have tendered their resignations to BFIL, such due process has not been initiated,” it added.

Spandana had announced that Saxena accepted the position of Managing Director & Chief Executive Officer, and Damani as the President & Chief Financial Officer of the company, respectively.

The private sector lender also said that Saxena and Damani are prohibited from accepting employment at a competitor of BFIL (such as SSFL), unless approved in writing by the board of BFIL.

“As resignation from BFIL has not been tendered to the board by Shalabh Saxena and/or Ashish Damani, any purported acceptance by them of employment at SSFL would be in contravention of the terms of their employment with BFIL,” IndusInd Bank said.

Further, it said that they cannot be relieved from the services of BFIL until completion of the review related to certain transactions relating to the micro finance lending arm.

An ongoing review and the continued employment of Saxena and Damani is critical to the closure of such process, the bank said.

Earlier this month, the bank had refuted a whistleblower allegations on loan evergreening at BFIL as inaccurate and baseless, however, it admitted to disbursing 84,000 loans without customers consent in May due to a “technical glitch”.

“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,” an official statement from the bank said on November 6.

“BFIL and the bank are in the process of evaluating and undertaking appropriate steps and actions, including strengthening the management of BFIL to continue its usual business operations under the able guidance of its management and the bank,” as per the filing.

Meanwhile, Spandana has sought time from Sebi to publish its financial results for quarter ended September 30, 2021, citing the recent management level changes at the company.

It was supposed to publish its financial results before November 14, 2021 — as the listed companies are required to publish the same to the stock exchanges within 45 days from the close of a quarter.

On November 2, Spandana informed that its Founder & Managing Director Padmaja Gangireddy had resigned from the company from immediate effect.

Hyderabad based Spandana Sphoorty is a rural-focussed non-banking financial company and a microfinance lender.

Stock of IndusInd Bank traded at Rs 990.95 apiece on BSE, up by 1.06 per cent from the previous close. Spandana Sphoorty scrip was down by 3.82 per cent at Rs 439.45.



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IndusInd Bank’s ‘technical glitch’: RBI examining portfolio as part of an ongoing audit

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The Reserve Bank of India (RBI) is already examining issues around the technical glitch at IndusInd Bank’s subsidiary that led to 84,000 loans being disbursed without the customers’ consent. The lender will also undertake an external audit of the issue if required.

This was informed by IndusInd Bank’s Managing Director and CEO, Sumant Kathpalia, at an analyst call on November 6. He also denied allegations of evergreening of loans and stressed that there is strong risk management and a control framework in place – both within the bank and its microfinance subsidiary Bharat Financial Inclusion Ltd (BFIL).

“Yes, it is part of the annual review process which happens and it is already going on and they (RBI) are reviewing this portfolio,” Kathpalia said in response to a query on whether this issue would be a part of the risk-based supervision audit that is conducted by the RBI. “The whistleblower complaint was marked to the RBI also and the bank has kept the regulator abreast on its internal review process,” he further said.

Internal review

Meanwhile, responding to another query, Kathpalia said the bank will appoint an external auditor to validate the results of the internal review.

Also read: IndusInd Bank shares slump 11 per cent following loan evergreening issue

“We will have the review process completed. We will have a committee which will include external participants and an external auditor validating the results, and will have an independent process to give comfort to the investors that everything is right in BFIL. We will not be happy only with the internal audit,” he said.

In the call, Kathpalia also said the bank has a strong succession plan for BFIL in place in case its top management leaves. Non-executive Vice Chairman of BFIL, MR Rao, had stepped down in September but Kathpalia said he continues to work as an advisor with IndusInd Bank.

‘Unlisted company’

While analysts expressed surprise that this was not informed to the stock exchanges, Kathpalia maintained that BFIL is an unlisted company. “There was an agreement that he will retire in March 2021 and we had honoured that… he was also very upset on the 84,000 loans. We have taken action against certain persons,” he said.

Also read: Under fire, IndusInd Bank begins review of microfinance subsidiary

Trying to assuage concerns, he also said that the bank has been following a conservative provisioning approach.

“IndusInd Bank could have done better in terms of communicating about the management changes in BFIL and a technical glitch in the microfinance book, which led to allegations of evergreening in the MFI book (which otherwise has always been an area of suspicion). We believe that the bank’s turnaround story remains intact but it needs to work more on strengthening credit underwriting/risk management, and communication with the stakeholders to sustain the long-term rerating,” said Emkay Global Financial Services in a note on Monday.

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IndusInd Bank shares tank after report of loan evergreening allegation at unit, BFSI News, ET BFSI

Banking & Finance

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BENGALURU – Shares of IndusInd Bank slid as much as 11.45% on Monday after a report said whistleblowers had alleged loan evergreening at the private sector lender’s micro finance arm.

On Friday, the Economic Times reported that whistleblowers had alerted the Reserve Bank of India (RBI) and the IndusInd board that Bharat Financial Inclusion (BFIL) had evergreened some loans – a practice where new loans are given to stressed borrowers to enable them to repay existing loans.

IndusInd denied the allegation in an exchange filing on Nov. 6 and said the report was “grossly inaccurate and baseless”.

However, it said nearly 84,000 loans were disbursed in May without customer consent due to a technical glitch and that the issue was rectified expeditiously.

IndusInd did not immediately respond to a Reuters request for comment.

On Monday, shares of the private sector lender were the top percentage losers on the Nifty private bank index and on track for their worst session since April 2020.

Due to pandemic-related restrictions, some loans had to be disbursed via cash at BFIL, and as of September-end, only 26,073 clients out of 84,000 were active with loan outstanding at 340 million rupees ($4.58 million), IndusInd said.

In multiple emails to the RBI and the IndusInd board in October, a whistleblower group that included BFIL officials alleged that the unit had evergreened loans, inflated revenues and under-reported non-performing assets, the report said.

The report also cited two people familiar with the developments saying there was a separate whistleblower complaint from an outsider on Oct. 14 that suggestions to set up risk management and audit committees for BFIL were ignored.

In its exchange filing, IndusInd said an independent review had been initiated by the bank to see if there was any process lapse or accounting failure at BFIL.

($1 = 74.1900 Indian rupees)

(Reporting by Chandini Monnappa in Bengaluru; Editing by Subhranshu Sahu)



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IndusInd Bank, BFSI News, ET BFSI

Banking & Finance

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IndusInd Bank on Saturday admitted that its micro-finance arm gave nearly 84,000 loans “without customer consent” due to a “technical glitch” in May 21, but denied whistleblowers’ allegations of “ever greening” — a ploy to mask defaults with new loans. An independent review has been initiated by IndusInds “to see if there is any process lapse or accounting failure at Bharat Financial Inclusion (BFIL), the bank’s wholly-owned micro-lending subsidiary, said an IndusInd release. “The Bank wishes to reiterate that there is a strong risk management and control framework in place, both within the Bank and at BFIL,” said the bank.

In multiple emails to the Reserve Bank of India (RBI) and the IndusInd board in October, a whistleblower group comprising officials of the BFIL had alleged that the bank had ever-greened loans, inflated revenues and under-reported nonperforming assets. The emails followed a month after similar allegations by former BFIL vice-chairman MR Rao who, in his resignation letter, had said that the loans disbursed without customer consent did not appear as “process lapse” but a “deliberate attempt to shore up repayments.” The letters from the whistleblower group and Rao’s parting observations were reported by ET on Friday.

Reacting to the whistleblowers’ allegations, a statement issued by the bank on Saturday, said, “…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 this portfolio. The standard operating procedure (SOP) has since been revised to make biometric authorisation compulsory.”

While strongly denying allegations of ‘ever greening’, the IndusInd statement said, “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… 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. (sic)”

The whistleblower group has blamed BFIL CEO Salabh Saxena and CFO Asish Damani for the alleged under-provisioning of loans running into thousands of crores. Neither of them responded to ET’s query on the whistleblower emails. According to a media report, both Saxena and Damani may soon quit BFIL and join Spandana Sphoorty, a micro-finance institution.

However, this could not be independently confirmed. According to the IndusInd release, the loans follow a weekly repayment model and the customers are required to make payments week on week. “.. if there is any default, the same gets recorded as missed instalments. In view of the weekly repayment model, the concept of ever greening is infeasible,” said the statement. “The level of non-performing assets reported by BHIL is significantly lower than other MFIs. So, we would like to know more, given that many lenders have seen a drop in collection efficiency during the pandemic.. If a loan is given by mistake without taking the borrower’s consent, it should be reversed,” said an analyst who did not wish to be named.



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