According to him, if indusind With management unable to quickly correct the practice of “adjusting new loan funds with overdues from earlier loans”, subsidiary BFIL will eat into the parent’s financials. The group has warned in at least two emails to IndusInd’s bank CEO that these alleged transactions to prepare the books have damaged the micro-loans business it has built over the years and even political Reaction can also start. Sumant Kathpalia, some independent directors and officials of the Reserve Bank of India between October 17 and 24.
IndusInd acquired micro-finance lender BFIL – formerly SKS Microfinance – in a stock deal in March 2019.
Kathpalia did not respond to ET’s queries. An official of a PR agency appointed by the bank said, “The bank has received complaints from unknown person(s). The bank has a well-established policy to deal with such cases and the veracity of the allegations/complaints needs to be assessed.” While the management review is underway, the bank is yet to find any material findings that warrant immediate action on any count (sic).”
Two persons familiar with the developments said that on October 14, there was a separate whistleblower complaint to the RBI from an ‘outsider’, which said that IndusInd’s unlisted micro-lending suggestions for setting up of risk management and audit committees for BFIL were rejected. Was overlooked as an assistant. Clause 49 of the listing agreement was not required to meet the conditions. It also talked about “process defaults” in loan contracts, cash disbursements and expanding accounting practices.
Former non-executive president of BFIL raises red flags
Micro lending companies disburse loans through banking channels but deposit cash during the recovery of the loan. Cash collections dropped for most micro-finance companies due to the pandemic, especially during the second wave.
Notably, on October 14, a month before the whistleblower’s complaint, BFIL’s non-executive president MR Rao had stepped down. Rao, who was the CEO of BFIL (SKS), in his September 15 resignation letter to the board members, said, “…I am aware that the RBI has raised issues with respect to BFIL, especially with respect to the 80,000 loans granted in May 2021. without the consent of the customer. This is a point on which I expressed deep concern to the board and in fact called for a third-party audit. For me it was not a process lapse but to increase repayment rates Appears to be a deliberate act. I had even warned the board of dire consequences…”
Rao did not respond to ET’s queries and declined to confirm whether he was among the whistleblowers. The company’s former chairman S Diliraj, who has been working with Rao for years, also declined to comment. Rao has asked the board to cancel its non-compete agreement with the company.
A person who identifies and declares himself as a ‘whistleblower’ before the RBI, expects a degree of legal protection. Also, the regulator does not disclose the identity of the whistleblower.
While an IndusInd Bank official said the bank has increased provisioning on its portfolio of micro-loans, a whistleblower email alleged that two senior BFIL executives, who were primarily responsible for hiding non-performing loans , threatening and tracking employees. Record their calls to stop talking about the matter. Another email said the government’s ECLGS scheme, aimed at providing emergency lines of credit in the wake of the pandemic, was used to “adjust dues instead of giving credit to customers”.