IndusInd Bank Says Whistle-blower Complaints Alleging Governance Lapses And 'Evergreen' Loans In BFIL Are Baseless, Inaccurate

Private lender IndusInd Bank has said allegations of lapses in governance and accounting norms leading to 'evergreen' loans by the bank are "inaccurate and baseless". It was responding to an Economic Times report, which stated that acting as whistleblowers, several people, including senior employees of the IndusInd Bank's Bharat Financial Inclusion (BFIL), have informed the Reserve Bank of India (RBI) about governance lapses and accounting norms meant to 'evergreen' loans. They added that the 'evergreen' loans have run into thousands of crores since the outbreak of the COVID-19 pandemic.

IndusInd Bank stated that all loans by the BFIL in the capacity of a business correspondent are approved by IndusInd Bank after a thorough audit, inspection, and risk and compliance checks. The NPA recognition process is fully automated in accordance with the regulatory norms that are applicable to the bank, it added.

Further, it said that BFIL has an executive-level Risk Management Committee which meets every month. The private lender informed that the committee was put in place immediately after the merger. 

It said that loans are disbursed by the BFIL only after Biometric authorisation of the customers. 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.

IndusInd Bank denied all allegations of 'evergreening' loans. It stated that all loans managed by BFIL were fully compliant with regulatory guidelines. It informed, "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."

The bank added that it had to provide additional liquidity support, restructure loans and provide additional loans with a long tenor to help BFIL customers.

The Economic Times report said that two people familiar with the development had suggestions to set up risk management and audit committees for BFIL but were ignored as the unlisted micro-lending subsidiary of IndusInd did not need to comply with Clause 49 of the listing agreement. The suggestions were made in whistleblower complaints to RBI by an 'outsider'.

Further, the report stated that one of the whistleblower complaints said the two senior officials of BFIL, who were primarily responsible for hiding non-performing loans, have been threatening employees and tracking their call records to restrain them from speaking on the matter.

IndusInd took over the micro-finance lender, BFIC (previously called SKS Microfinance) in an all-stock deal in March 2019.