Tag: IndusInd Bank

IndusInd Bank appoints Deloitte to review whistleblower allegations at arm Bharat Financial, BFSI News, ET BFSI

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Private lender IndusInd Bank has appointed audit firm Deloitte to conduct an independent review of the whistleblower allegations on evergreening loans at its arm Bharat Financial Inclusion Limited (BFIL).

Until the completion of this review, the Board of Bharat Financial has deferred the decision to consider the resignations of Executive Director and CFO Ashish Damani as well as MD and CEO Shalabh Saxena; the top executives had tendered their resignation November 25, IndusInd Bank informed stock exchanges November 29.

“Both the Employees have offered their assistance in the ongoing review of transactions related to BFIL, for which the Bank has appointed a renowned international audit firm to conduct independent review and ascertain veracity of the anonymous complaints,” IndusInd Bank November 29’s regulatory filing said.

In the filing, IndusInd Bank did not disclose the name of this “renowned international audit firm”. ETCFO confirmed with a source aware of the matter who shared it is Deloitte. Deloitte will review loan disbursement processes at Bharat Financial and check if they are compliant with the Reserve Bank’s stipulated norms, the source, who did not wish to be identified, said.

A detailed questionnaire sent to IndusInd Bank seeking the audit firm’s name, its date of appointment, the expected timeframe of the independent review, and other queries asked in respect of whistleblower allegations went unanswered while Deloitte could not be reached.

On November 5, The Economic Times’ Sugata Ghosh had reported that a group of senior employees at Bharat Financial Inclusion, acting as whistleblowers, had alerted the Reserve Bank and the Board of the parent IndusInd Bank on lapses in governance and accounting norms to allegedly evergreen loans. The report pointed that the group had warned in at least two mails to IndusInd Bank CEO Sumanth Kathpalia between October 17 and October 24, and there was a separate whistleblower complaint from an outsider to RBI on October 14.

The report also said Bharat Financial Inclusion Non-Executive Chairman M R Rao had raised red flags in his resignation letter on September 15. “I am aware that RBI has raised issues with respect to BFIL particularly that 80,000 loans were given in May 2021, without customer consent. This is a point on which I expressed in the Board and in fact demanded a third-party audit too. To me it appears to be not a process lapse but a deliberate act to shore up repayment rates. I had warned the board too about the serious consequences,” Rao had said.

On November 6, the IndusInd Bank, came out with a press release, and refuted whistleblower’s allegations on loan evergreening at BFIL, terming them as “grossly inaccurate” and “baseless”, however, it admitted to disbursing 84,000 loans without customers consent and held technical glitch responsible for it.

CFO, CEO Resignations

The governance issue at the IndusInd’s arm became more prominent when Spandana Sphoorty Financial Ltd, a Hyderabad-based micro-lender, announced on November 22 the appointment of Shalabh Saxena as MD and CEO and Ashish Damani as its CFO.

A day later, on November 23, Indusind Bank came out with a regulatory clarification saying the duo are still employed with Bharat Financial Inclusion, and have not tendered their resignations. “…certain transactions relating to BFIL are subject matter of an ongoing review and the continued employment of Mr. Shalabh Saxena and Mr. Ashish Damani at BFIL is critical to the closure of such (a) process,” the clarification had said.

Subsequently, on November 25, the BFIL’s CFO and CEO tendered their resignations, IndusInd Bank informed in its stock exchange filing on November 29. In the interim, the lender has nominated J Sridharan, who has over two decades of experience in managing finance and governance functions at the bank, as Executive Director on the BFIL’s Board. Bharat Financial Inclusion Former Non-Executive Chairman M R Rao continues to be associated as an advisor to BFIL, the lender said.



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How Indian banks are leveraging blockchain technology, BFSI News, ET BFSI

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In a bid to foster blockchain technology for providing various financial services, banks have put in place Indian Banks’ Blockchain Infrastructure Company Private Limited (IBBIC).

The Reserve Bank of India (RBI) has informed that it has been proactive in providing guidance for development of blockchain-based application through its new regulatory sandbox environment, the government told the Rajya Sabha.

“State Bank of India (SBI) and Canara Bank are part of a company called Indian Banks’ Blockchain Infrastructure Company Private Limited for using blockchain technology for providing various financial services. SBI has informed that as a part of IBBIC development, it has initiated steps to incorporate blockchain technology in trade-related transactions,” the government said.

Further, SBI has been onboarded on a blockchain-enabled platform, for exchanging payment-related compliance queries.

Canara Bank has informed that it had formed a small technology innovation team, which is working on identifying the potential use cases best suited to banking operations, he added.

The deployment

Banks are looking to deploy the blockchain technology to solve issues in the processing of Letters of Credit (LCs), GST invoices and e-way bills.

Currently, the process of issuing an LC is relatively slow and requires human intervention to prevent frauds, authenticate transactions, and balance the ledger.

Using blockchain to issue LCs would potentially solve these issues. Even elemental fraud like the issuance of two LCs on a single invoice can be easily prevented with the help of this blockchain technology.

The move is expected to eliminate paperwork, reduce transaction processing time, and offer a secure environment. The system will be based on Infosys’ Finacle Connect, a blockchain-based platform that enables digitisation and automation of trade-related finance processes. Disbursements on domestic LCs, which used to take four to five days, can be done in four hours with the technology. The technology has already been deployed or piloted by the likes of SBI and Axis Bank at an individual level.

Who are the stakeholders of IBBIC?

Out of the 15 banks, eleven are private sector banks while four are public sector ones.

The private banks include HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Axis Bank, IndusInd Bank, Yes Bank, RBL Bank, IDFC Bank, South Indian Bank, and Federal Bank. And, the public sector units encompass Bank of Baroda, SBI, Canara Bank, and Indian Bank.

The incorporation of IBBIC is similar to that of the National Payments Corporation of India (NPCI), which is an umbrella organization that handles critical real-time products like RuPay, UPI, and FASTag.



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Emkay Global, BFSI News, ET BFSI

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The recent Reserve Bank of India clarification on banks’ promoter holdings is likely to benefit IndusInd Bank, if the central bank does not have any issues related to the promoters, Emkay Global said in a report.

In IndusInd Bank, the Hinduja brothers hold a 16.5 percent stake. The increase in promoter stake will boost the bank’s financial strength, and their clients will be protected.

The RBI had recently clarified that the promoters who have recently reduced their holdings to below 26% and want to increase it back, can approach the central bank. The promoter will have a choice to bring down the promoter holding to below 26% after the initial locking period is over.

The RBI retained the norm to maintain a minimum (floor) of 40% of paid-up voting equity share capital by the promoter for the first five years, but there is no cap on the promoters’ holdings in the initial five years, Emkay highlighted. That said, the cap on the promoter’s stake over 15 years has been raised from 15% to 26%, which was implemented in the case of Kotak Mahindra Bank.

Non-promoter shareholding will be capped at 10% of the paid-up voting equity share capital of the bank for natural persons and non-financial institutions and at 15% for all categories of financial institutions, supranational institutions, public sector undertaking or government. If this is allowed, then possibly HDFC may not had to bring its stake in Bandhan to 10%, Emkay said.

In the case of invoking pledged shares of a bank, the pledgee’s voting rights will be restricted to 5% till the time the pledgee obtains permission from the RBI for the regularisation of the acquisition of these shares.

The RBI has retained non-operative financial holding company (NOFHC) as the preferred structure for all new licences to be issued for universal b anks, but it will be mandatory only in cases where the individual promoters, promoting entities or converting entities have other group entities, the report said. However, banks currently under NOFHC, such as IDFC First Bank and Bandhan Bank, may be allowed to exit such a structure if they do not have any other group entities in their fold.

The RBI has given in-principle approval to IDFC First Bank-Bandhan Bank, but IDFC will have to first divest stake in its MF/tech businesses for a reverse merger with IDFC First Bank, while Bandhan Bank is not keen on diluting the structure as of now, the report said.

Furthermore, on the relaxation of the listing norms for future small finance banks (SFBs), existing SFBs in queue, including Utkarsh, Fincare, Jana, ESAF, and even the recently-formed Unity SFB, may not get any relief. However, Unity SFB, which is a venture between BharatPe and Centrum, could have different terms, given the potential acquisition of beleaguered PMC Bank.

Small finance banks can now list within eight years from the date of commencement of operations against the earlier condition of within three years of reaching a net worth of Rs 5 billion, and against the demand for 10 years. For universal banks, the listing requirement remains the same, that is after six years of commencement of operations.



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IndusInd Bank micro fin arm’s CEO, ED exit, BFSI News, ET BFSI

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Mumbai: IndusInd Bank on Monday said that two senior executives of its microfinance institution (MFI) arm Bharat Financial Inclusion — MD & CEO Shalabh Saxena, and ED & CFO Ashish Damani — have resigned. The bank has appointed an executive director and another senior executive to hold fort until a new management is in place.

The announcement appears to indicate a resolution of the row between the bank and Spandana Sphoorty Financial Services. Last week, the bank had said that Saxena and Damani were not relieved from their positions and they needed to continue in order to be part of a review of certain transactions. The announcement was in response to Spandana Sphoorty Financial declaring the appointments of Saxena and Damani. On Monday, IndusInd Bank said that both the executives had tendered their resignations to the chairman of the board. The bank also said that they have offered their assistance in the ongoing review of transactions related to Bharat Financial, for which the bank has appointed a “renowned international audit firm” to conduct independent review and ascertain the veracity of the anonymous complaints.

Shares of IndusInd Bank rose in early trade but closed marginally in the red, ending at Rs 895 on Monday. Last weekend, the RBI announced that it would allow promoters of private banks to hold up to 26%. It added that it would permit those promoters who have already diluted stake to increase it up to the new limit. “We eagerly await the operating guidelines as it gives the promoters an opportunity to inject capital to increase stake up to 26%,” Ashok Hinduja, chairman of IIHL, Mauritius, promoter entity of IndusInd Bank, had said.

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IndusInd Bank board yet to decide on Shalabh Saxena, Ashish Damani’s resignation from Bharat Financial Inclusion

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The top honchos of Bharat Financial Inclusion Ltd — Shalabh Saxena and Ashish Damani — have resigned from their positions but the board has decided to defer the consideration of the decision to relieve them until an ongoing review is completed, IndusInd Bank said on Monday.

A review of disbursal of nearly 84,000 loans without customer consent due to a technical glitch at BFIL is at present going on at the microfinance company.

“Shalabh Saxena and Ashish Damani, currently employed with BFIL in the capacity of the Managing Director and CEO and the Executive Director and CFO, respectively, have tendered their resignations pursuant to e-mails addressed to the Chairman of the Board of BFIL on November 25, 2021,” the private sector lender said in a stock exchange filing on Monday.

IndusInd Bank objects to Saxena, Damani joining Spandana Sphoorty

The announcement comes after Spandana Sphoorty (SSFL) had on November 22 announced the appointment of Saxena as its new Managing Director and CEO and Damani as the President and Chief Financial Officer.

BFIL is the wholly owned microfinance subsidiary of IndusInd Bank.

Global audit firm

Both of them have offered to assist in the ongoing review of transactions related to BFIL, for which the bank has appointed an international audit firm to conduct independent review and ascertain the veracity of the anonymous complaints, the bank further said.

“The board of BFIL has deferred consideration of the decision to relieve them until the completion of the ongoing review,” IndusInd Bank said.

The lender has nominated J Sridharan as Executive Director on the Board of BFIL and appointed Srinivas Bonam to oversee the day-to-day functioning of BFIL, it further said.

“MR Rao continues to be associated as an advisor to BFIL bringing his years of experience in microfinance and scaling up BFIL,” IndusInd Bank said, adding that it has also appointed KV Rao, who is the former Chief Operating Officer and Head Member Services for 11 years at BFIL, as an advisor for strengthening the field processes.

Previously, on November 23, the bank had said that Saxena and Damani had not yet resigned from BFIL and had cited a non-compete clause in their contracts that prohibited them from accepting employment at a competitor of the microfinance company.

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Bharat Financial top management resignations: Board defers relieving them till completion of review, says IndusInd Bank

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The top management of Bharat Financial Inclusion Ltd – Shalabh Saxena and Ashish Damani have resigned from their positions, but the board has decided to defer the consideration to relieve them until an ongoing review is completed, IndusInd Bank said on Monday.

A review of disbursal of nearly 84,000 loans without customer consent due to a technical glitch at BFIL is going on at the microfinance company.

“Shalabh Saxena and Ashish Damani, currently employed with BFIL in the capacity of the Managing Director and CEO and the Executive Director and CFO, respectively, have tendered their resignations pursuant to emails addressed to the Chairman of the Board of BFIL on November 25, 2021,” the private sector lender said in a stock exchange filing on Monday.

The announcement comes after Spandana Sphoorty (SSFL) had on November 22 announced the appointment of Saxena as its new Managing Director and CEO and Damani as the President and Chief Financial Officer.

BFIL is the wholly-owned microfinance subsidiary of IndusInd Bank.

Both of them have offered to assist in the ongoing review of transactions related to BFIL, for which the bank has appointed an international audit firm to conduct an independent review and ascertain the veracity of the anonymous complaints, the bank further said.

“The Board of BFIL has deferred consideration of the decision to relieve them until the completion of the ongoing review,” IndusInd Bank said.

The lender has nominated J Sridharan as Executive Director on the Board of BFIL and appointed Srinivas Bonam to oversee the day-to-day functioning of BFIL, it further said.

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Indusind Bank’s Hindujas welcome RBI move to up promoter holding to 26%, BFSI News, ET BFSI

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The Hindujas, who had earlier applied to RBI seeking to increase their holding in Indusind Bank, on Saturday welcomed the RBI move to allow promoter holding of up to 26 % in private sector lenders. IIHL Mauritius, the Hindujas’ entity which is the promoter of IndusInd Bank, had applied to RBI to increase its holding to 26 % from the previous cap of 15 %, seeking parity after promoters of rival Kotak Mahindra Bank were given the permission to have their holding at 26 % after dragging the RBI to courts.

“We believe this measure of increased promoter holding will be of benefit to all stakeholders: the regulator, the banking institution and its clients, particularly at this time when Indian economy is poised for exponential growth,” Ashok Hinduja, the chairman of IIHL, said.

The RBI on Friday came out with revised guidelines on private sector banks, allowing for 26 % promoter ownership but did not go ahead with an internal working group’s recommendation to allow corporates to promote banks after protests from various quarters including former governors.

Hinduja said IIHL now awaits operational guidelines as it gives the promoters an opportunity to inject capital to increase stake up to 26 %.

The increased promoter holding will lead to enhanced financial strength of the bank and its clients will be protected, he added.



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Technology, collaborations, personalisation will drive customer experience, say top bankers, BFSI News, ET BFSI

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Zuzar Tinwalla and Charu Mathur were part of a fireside chat, moderated by Amol Dethe, Editor, ETBFSI.

BFSI companies have been undergoing rapid digitisation for some years now. While many organisations had already been at the forefront in digitisation, the COVID-19 pandemic further amplified this adoption of new technologies.

“Pandemic has presented us with both difficulties and opportunities,” said Zuzar Tinwalla, COO-India & South Asia, Standard Chartered Bank at a fireside chat of ETBFSI Converge, titled ‘Crafting Tailor Made Products for Customers’.

Customer centric models

“Earlier, technologies were designed by keeping the internal processes guidelines and efficiency in mind, but that’s no longer the reality. Now, to be relevant, you have to keep the customer’s needs in mind.” he said, while elaborating on digitisation and how banks are catching up with it.

Charu Mathur, CDO & Head-Business Strategy of IndusInd Bank, adding to this, explained how banks have to be customer centric and not just process centric.

Technology, collaborations, personalisation will drive customer experience, say top bankers

“It is extremely important for us now to understand our clients very deeply and keep our ears close to them,” she added.

Zuzar Tinwalla and Charu Mathur were part of a fireside chat, moderated by Amol Dethe, Editor, ETBFSI.

Adopting technology: Data science, AI & ML

Banks are rapidly adopting new technologies like data and analytics, AI & ML, bots and robots. Tinwalla said, “ Anything more than 90 days is now considered obsolete.”

“We are investing capabilities in building the basic data foundation, and that’s a very critical function as you go along. And then sitting on top of that, you need an intelligent modeling capability or a data science function as we call it. Leveraging machine learning and artificial intelligence, and connecting dots and making logical sense out of it is important. And then at the top, you need a delivery mechanism,” said Mathur.

Although AI will progress, it will never replace human intelligence, Tinwalla said. “What is going to be appropriate for the organisation is still a human decision,” Zuzar added.

What does the future look like?

The panelists agree that many collaborations with fintechs are going to be witnessed in the coming years.

“There’s a lot to learn from fintechs,” said Tinwalla, while explaining how fintechs complement and compete with banks.

Technology, collaborations, personalisation will drive customer experience, say top bankers

On the innovation front, Mathur said, “Personalisation aspect will play a major role in driving customer experience. We see brands like Amazon and Netflix doing it quite well. I think more and more banks will probably start delivering something on the personalisation aspect, and demonstrate their ability of understanding the customer much deeper than what we do today.”

Furthermore, she believes that composable systems, which are completely API native to the core, will allow the banks to create products and services completely tailor made to a client’s unique requirements.



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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: Shalabh Saxena, Ashish Damani yet to resign from BFIL to join Spandana Sphoorty

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IndusInd Bank on Tuesday said Shalabh Saxena, the Managing Director and CEO of Bharat Financial Inclusion Ltd, and Ashish Damani, Executive Director & Chief Financial Officer of BFIL, are yet to resign and as per their terms of contract, they are prohibited from accepting employment at a competitor of the microfinance company.

Further, they cannot be relieved from the services of the company until an ongoing review into the disbursal of nearly 84,000 loans without customer consent due to a technical glitch at BFIL is completed.

Under fire, IndusInd Bank begins review of microfinance subsidiary

“…the continued employment of Shalabh Saxena and Ashish Damani at BFIL is critical to the closure of such process. Accordingly, they cannot be relieved from the services of BFIL, until completion of the said review,” IndusInd Bank said in a stock exchange filing.

BFIL is a wholly-owned subsidiary of IndusInd Bank.

Clarification

“Neither Shalabh Saxena nor Ashish Damani have tendered their resignation from the services of BFIL. 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. However, as neither of them have tendered their resignations to BFIL, such due process has not been initiated,” it further said.

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

Its clarification comes a day after Spandana Sphoorty (SSFL) announced the appointment of Saxena as its new Managing Director and CEO and Damani as the President and Chief Financial Officer.

“Both Saxena and Damani will join Spandana soon,” it had said.

IndusInd Bank further said that as per their contractual terms of employment Saxena and Damani are also prohibited from accepting employment at a competitor of BFIL (such as SSFL), unless approved in writing by the Board of BFIL.

“As stated above, 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 will be in contravention of the terms of their employment with BFIL,” it said.

BFIL and IndusInd 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, the lender said.

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