IndusInd Bank admits to procedural lapses in MFI lending

Pivate sector lender IndusInd Bank on Saturday reported a 49 per cent jump in its December quarter net profit to Rs 1,241.55 crore, and admitted to procedural lapses in its microlending vertical earlier during the fiscal.

The bank’s chief executive and managing director Sumant Kathpalia said an investigation into a whistleblower complaint on November 6 has revealed procedural lapses in lending practices in the microfinance book, but stressed that it will not lead to any financial hit.

There were reports alleging the possibility of evergreening of loans as loans were given sans customer consent, which helped the bank suppress non-performing assets in the COVID-hit Q1. Kathpalia said addressing the concerns on the microfinance book was one of the focus areas for the bank during the quarter, and added that it has finished an internal review even as the findings of an external review are yet to be completed.

The external review report submission and deliberations will be completed in the next fortnight, he said, making it clear that accountability will be fixed on erring staffers.

”The internal report has informed us that there was one MFI product, which offered liquidity support to customers impacted by COVID second wave after clearing existing dues. However, it was observed that cash disbursement and repayment of arrears took place on the same day, which is a procedural lapse in our opinion. The product was discontinued in September,” Kathpalia said.

Kathpalia said loans of Rs 179 crore were outstanding under the product, and all of them have been written off after being provided fully, and stressed that the overall credit cost on the MFI portfolio that forms 12 per cent of the bank’s overall advances will not exceed 8 per cent.

The bank has not received any “written” communication from the Reserve Bank regarding the matter, Kathpalia said, when asked about the media reports saying the regulator is also looking into the matter. The head of the bank said the MFI operations will normalize from here on, and the fourth quarter will also see a growth in the book as disbursements happen.

For the reporting quarter, the bank’s core net interest income (NII) rose 11 per cent to Rs 3,793 crore, on the back of a 10 per cent growth in advances and a 0.02 per cent narrowing in net interest margin to 4.10 per cent.

The total fee income rose 14 per cent to Rs 1,877 crore while deposits jumped 19 per cent.

Overall provisions came at Rs 1,654 crore as against Rs 1,853 crore in the year-ago period, while the gross non performing assets ratio improved to 2.48 per cent as against the quarter-ago period’s 2.77 per cent. Its capital adequacy stood at 15.13 per cent as against 15.42 per cent at the end of quarter-ago period.

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