Tag: Bharat Financial Inclusion

Whistleblowers alert RBI about evergreening of loans at IndusInd Bank subsidiary

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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A group of senior officials at microlending firm Bharat Financial Inclusion has alerted the Reserve Bank of India and its board of the misgovernance and lapse of accounting norms to “evergreen loans” since the outbreak of the COVID-19 pandemic, reports said.

Bharat Financial Inclusion, formerly known as SKS Microfinance, is a subsidiary of IndusInd Bank. IndusInd Bank acquired Bharat Financial Inclusion in 2019.

Acting as whistleblowers, the officials warned that if the practice of “adjusting new loan money with overdues from earlier loans” is not checked immediately, the fault in the subsidiary would eat into the financials of the parent, Economic Times reported.

Evergreening of loans is a popular practice in which banks grant new loans to an account to revive those loans on the verge of default. A measure to hide non-performing assets (NPAs), evergreening of loans has far reaching consequences in terms of default.

The senior employees alleged efforts to dress-up loan books may result in a political backlash apart from ruining the microlending business built over years. The group sent emails to RBI officials, IndusInd Bank CEO Sumant Kathpalia and independent directors between October 17 and 24.

Acknowledging the complaint, an official at the PR agency for IndusInd Bank said, “While management review is in progress, the bank has yet not come across any material findings that warrant immediate action on any count (sic).”

IndusInd CEO Kathpalia did not respond to queries from ET.

A separate whistleblower complaint to RBI on October 14 had suggested setting up risk management and audit committees, which were ignored by the Bharat Financial Inclusion management, two anonymous sources told Economic Times. According to the management, it was not required for the unlisted microlending subsidiary of IndusInd to meet such norms.

In September, M.R. Rao, non-executive chairman of Bharat Financial Inclusion, resigned saying, “I am aware that RBI has raised issues with respect to BFIL particularly the 80,000 loans given in May 2021, without customer consent.”

Rao added that it appeared that these concerns were not process lapses but “a deliberate act to shore up repayment rates”.

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Bharat Financial Inclusion’s top leadership likely to head to Spandana Sphoorty

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Spandana Sphoorty’s Founder and MD, Mrs Padmaja, had resigned on November 2, 2021 and the company has also seen resignation of their CFO Mr Satish Kottakota with effect from October 1, 2021.

CNBC-TV18 learnt that Bharat Finanical Inclusion’s top leadership could be heading to Spandana Sphoorty.

It is understood that Shalabh Saxena, who is currently the MD and CEO at Bharat Financial Inclusion, may join Spandana Sphoorty replacing the outgoing MD and founder Mrs Padmaja.

Mr Ashish Damani, CFO at Bharat Financial Inclusion, may also join Spandana Sphoorty as their Chief Financial Officer (CFO).

Watch the accompanying video of CNBC-TV18’s Abhishek Kothari for more details.

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lnduslnd Bank-Bharat Financial Inclusion merger to be effective from July 4

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Private sector lender lnduslnd Bank and Bharat Financial Inclusion Ltd (BFIL) on Wednesday said their merger will be effective from July 4. The National Company Law Tribunal on June 10, 2019 approved the Scheme of Arrangement among BFIL, lnduslnd Bank and Induslnd Financial Inclusion and their respective shareholders and creditors.

IndusInd Bank in October last year decided to acquire the country’s leading micro-finance player BFIL, which was previously known as SKS Microfinance.

The boards fixed Thursday, July 4, 2019 as the effective date of the scheme, when the NCLT order will be filed by the bank, BFIL and IFIL with the jurisdictional Registrar of Companies.

Besides, the Boards Wednesday have decided to take on record and publish consolidated financial results for the quarter ending June 30, 2019, on July 12, 2019.

“July 4, 2019 shall also be the Record Date, following the effectiveness of the scheme, for determining the shareholders of BFIL who shall be entitled to receive shares of the bank, as consideration pursuant to the Scheme,” both the companies said in regulatory filings.

In accordance with the scheme, Bharat Financial shareholders will get 639 shares of the bank for every 1,000 held.

The scheme also contemplates a preferential allotment of share warrants to the promoters of the bank in accordance with the scheme, it said.

“Each share warrant, upon exercise, shall entitle the Promoters to one Equity share. The Share Warrants shall be issued to the Promoters of the Bank at Rs 1,709 per warrant, which has been determined in accordance with the applicable SEBI regulations, and is confirmed by the NCLT order,” it said.

Pursuant to the scheme, the Promoters of the bank will pay an amount equivalent to 25 per cent of the aggregate consideration for the share warrants on the effective date.

All the employees of BFIL will become part of Induslnd family and M R Rao, currently MD and CEO of BFIL, will become the MD & CEO of IFIL, it said.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

IndusInd Bank, Bharat Financial boards likely to meet next week to finalise merger, says Romesh Sobti

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The boards of IndusInd Bank and Bharat Financial Inclusion could meet next week, hopefully, to complete the formalities of the proposed merger, said Romesh Sobti, managing director and CEO of IndusInd Bank, adding that the June-quarter results will include consolidated financial statements of the two banks.

“The liability profile is an important part of the synergy. They have 9-9.5 million customers, 115,000 villages, 1,800 branches and each one of these customers will have a savings bank account. So, over the next 2-3 years this will become an additional low cost source of raising liabilities,” added Sobti.

He further said that IndusInd’s microfinance institution (MFI) book will be at 9-10 percent after the Bharat Financial merger.

Talking about stressed assets, he said, “Our special mention accounts 1 and 2 (SMA) exposure sectorally was less than Rs 600 crore over 45 odd companies. So we have nil overdue.”

Loan growth in FY20

On the business front, he said, “Our commercial vehicle (CV) book is growing healthily even if the market slowed down and also the NBFC portfolio is behaving well, we are not seeing any undue stress there.”

“We have got diversified loan book, so for us doing mid-20 growth in loan book is not a stretch but in the system the NBFCs has played a huge role in the flow of credit and one of the ways they have adapted to cope with liquidity is to slow down the pace of lending because disbursements slowed down, repayments are still coming in, there are no defaults in their books. I think that is going to affect overall credit growth and to that extent these people need some liquidity support,” Sobti added.

According to him, provision coverage ratio should go back to 60 percent by FY20.

Succession plan

Sobti has built this bank from strength to strength and in 9 months he will call it a day. Sobti said that the board has been engaged with me on an orderly succession.

“The board and I are committed to giving a smooth succession. So all that is in place; grooming and all has been done for many years now and we are confident that the switchover will happen,” he added.

He believes that the RBI will retain its succession and retirement deadline

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow