Private sector lender Bandhan Bank on February 12 said the bank is confident that its claims from credit guarantee fund for micro units (CGFMU) will be settled favourably, even as the audit by National Credit Guarantee Trust Company (NCGTC) is ongoing.
Bandhan Bank had taken insurance of the portfolio of Rs 20,800 crores under the CGFMU scheme and disbursed over Rs 1,950 crore under the Emergency Credit Line Guarantee Scheme (‘ECLGS’) in FY 2020-21. The Kolkata-based lender said it is fully cooperating with the agency on the audit.
What The Credit Guarantee Scheme Says
The maximum eligible amount a bank can claim under the CGFMU insurance is 15 per cent of the total insured amount. So far, the Bank has claimed and received an amount of Rs 917 crore from the NCGTC in December 2022. Post this, the bank made an additional claim of Rs 1,296 crore during the second quarter (Q2FY24).
Audit Over 'Evergreening of Loans'
Responding to some media reports regarding the NCGTC audit on 'evergreening of loans', Bandhan Bank had said the audit has been initiated by NCGTC which is the implementing agency of the credit guarantee schemes and not by the banking regulator, Reserve Bank of India (RBI).
Earlier, some media reports had reported that NCGTC - the agency which implements the credit guarantee schemes - had initiated a forensic audit of Rs 20,800 crores worth of micro loan portfolio of Bandhan Bank following concerns of evergreening of loans.
Bandhan Bank's Clarification
Responding to reports, Bandhan Bank had clarified that the total claimed amount so far is much lower than the maximum eligible amount. "It may also be noted that nearly 85 percent of the funds disbursed have been repaid by customers," the bank said.
With respect to the residual non-performing portfolio, the bank had made a provision of around 88%, Bandhan had informed stock exchanges. Furthermore, the recovery process from these accounts is underway and the bnk has already recovered more than 20% of the claimed and received amount of Rs 917 crore from underlying customers, it said.
NCGTC had conducted an initial sample audit through an independent agency after the second claim, Bandhan said. "The NCGTC has made certain observations based on the sample audit and the Bank has provided clarifications for the same. Subsequently, NCGTC decided to commission a detailed audit of the claims," the bank added.
Overhang On Share Price
The stock of Bandhan Bank was sharply lower by more than seven percent to Rs 199 per share on February 12. The shares price is down 12 percent in the past one month as against a 1.8 percent drop in the benchmark Sensex due to a mix of factors, including concerns on asset quality and the overhang of NCGTC audit.
This isn't the first time Bandhan Bank has had to clarify on the NCGTC audit. Last month too, the bank had issued a similar clarification saying the NCGTC has decided to conduct a detailed audit for the CGFMU portfolio of financial year 2020-21, but had asserted that this isn’t an audit by the regulator.
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