IndusInd Bank said its subsidiary’s microfinance loan disbursements during the COVID-19 period were the result of a “technical glitch”, according to findings from audit firm Deloitte, and the bank set up a panel to assess the accountability of its staff.
The case relates to allegations of disbursement of microfinance loans by its subsidiary Bharat Financial Inclusion Ltd (BFIL) between March 2020 and October 2021, without seeking consent from clients.
Following receipt of the complaints, the bank took immediate corrective action, including conducting an internal audit, an IT audit, and discontinuing OTP-based authentication for loan disbursement in November 2021.
Subsequently, it appointed Deloitte Touche Tohmatsu India LLP (Deloitte) to conduct an independent review.
IndusInd Bank said Deloitte submitted its final report on March 7, 2022. Based on the report’s assessment and findings, the bank’s board noted the key points that there was a technical issue which led to the disbursement of loans without recording the client’s consent. .
It was the result of IT change management and the process gap, IndusInd Bank said in a stock filing late Tuesday night.
“The portfolio, net of provisions, where registration of consent was an issue stood at Rs 8.87 crore as of December 31, 2021 (0.03% of the microfinance portfolio).
“The bank’s microfinance products require full collection of arrears or repayment of delinquent loans before further disbursement to a client. Some operational issues were highlighted during the rollout of the product,” the bank said.
On a conservative basis, the bank carries a contingent provision of Rs 3,328 crore outside the provision coverage ratio, including Rs 368 crore towards the standard microfinance portfolio, as of December 31, 2021.
“In addition, the bank will make an additional provision of Rs 13.5 crore in Q4FY22 based on the findings of the review. The Board has appointed a committee to assess staff liability, if any, arising from of the report’s findings,” he said. in the file.
The lender reiterated that there is a “robust risk management and control framework”, which will be further strengthened, based on the findings of the independent review.
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