Calling whistleblowers’ allegations of loan renewals “grossly inaccurate and unfounded,” Indusind Bank admitted on Saturday that it disbursed 84,000 loans without customer consent in May due to a “technical glitch.”
Loans without consent were reported by field staff within two days, and the problem was also corrected quickly, the private sector lender said in a clarification.
There was a media report on Friday of anonymous whistleblowers writing to the bank’s management and the RBI about BFIL, the bank’s microcredit-focused subsidiary, allegedly resorting to loan rollovers, in which existing borrowers unable to pay their contributions were granted new loans to present the books as clean.
“The bank strongly denies the allegations of ‘evergreening’. All loans issued and managed by BFIL, including during the COVID period which saw the first and second waves ravage the countryside, are in full compliance with regulatory guidelines,” a statement read. official. .
“Due to a technical problem in May 2021, nearly 84,000 loans were disbursed without the client’s consent being recorded at the time of loan disbursement,” he added.
“Operational issues” due to the second wave of the pandemic, such as blockages, containment zones and restrictions at the village / panchayat level, necessitated the disbursement of some cash loans, he said.
At the end of September, 26,073 of these 84,000 customers were active with outstanding loans. ??34 crore, which is 0.12% of the portfolio at the end of September, the bank said, adding that it was carrying the necessary provisions against loans.
He also said that the standard operating procedure has since been revised to make biometric authorization mandatory, and that in October 2021, almost 100% of loan disbursements were in customer bank accounts, as in the pre-days. -COVID.
During the pandemic, customers encountered operational difficulties and some turned to intermittent payers, although a large portion of them repeatedly showed a strong intention to repay, according to the bank statement.
The bank added that assistance had been provided to these customers, in particular through additional liquidity support to the tune of 20% of the outstanding amount as at February 29, 2020, as applicable under the ECLGS (Emergency Credit Line Guarantee Scheme), Restructuring and Supplementary Loan. with a longer duration and lower EWI (equivalent weekly payments) for clients, once they have cleared their arrears and with their consent.
It can be noted that almost all lenders have reported setbacks on the microcredit front since the start of the pandemic. Activity is concentrated in rural areas, where a lender’s field agents go in-depth to disburse loans and also collect cash contributions on a weekly basis.
With the easing of foreclosure measures, all lenders report improved collections and disbursements.
Indusind Bank management had reported increased strains in the microfinance loan portfolio, with the gross non-performing assets ratio rising to 3.01 percent in September, from 1.69 percent in June.
The new slippages in the book had ??1,070 crore in the September quarter, while net recoveries and upgrades stood at ??460 crores.
According to Friday’s media report, the whistleblower communication to the Managing Director of Bank Sumant Kathpalia, independent directors and RBI officials took place between October 17 and 24. In addition, there was also a “stranger” who wrote to RBI in October. 14, he said.
The report pointed out that a month before the October 14 complaint, BFIL’s non-executive chairman, Mr. Rao, resigned and also pointed out RBI’s concerns about loans made without the client’s consent in his resignation letter, calling it a deliberate act to consolidate the repayment. rates.
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