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Bandhan Bank Audit Investigation Report on Rs.20,800 crore insurance claims to be released soon


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According to sources familiar with the matter, the National Credit Guarantee Trust Company (NCGTC) is expected to submit its audit report on Bandhan Bank’s claims under the CGFMU and ECLGS schemes soon. The audit was reportedly almost completed last week, and the NCGTC is unlikely to have found any major issues in the bank’s micro loan book.

Bandhan Bank has obtained insurance coverage of Rs 20,800 crore for its portfolio under the Credit Guarantee Fund for Micro Units (CGFMU) scheme and has disbursed over Rs 1,950 crore under the Emergency Credit Line Guarantee Scheme (ECLGS) during the financial year 2020-21.

However, the NCGTC had previously raised concerns about some of the loans being evergreen or associated with fictitious accounts, which were allegedly done to obtain the maximum guaranteed cover. Evergreening refers to the practice of providing additional loans to borrowers who are unable to repay existing loans, thereby hiding the true status of non-performing assets (NPAs) or bad loans.

Bandhan Bank’s Managing Director and CEO, Chandra Shekhar Ghosh, stated during an analyst call that the bank expects a positive response from the CGFMU audit. In the fourth quarter of FY24, the bank wrote off Rs 3,852 crore to cover the micro loans under investigation by the NCGTC.

Under the CGFMU insurance, a bank can claim a maximum of 15 percent of the total insured amount. Bandhan Bank has already claimed and received Rs 917 crore from the NCGTC in December 2022, and an additional claim of Rs 1,296 crore in the second quarter of FY24.

The bank clarified that the total amount claimed so far is much lower than the maximum eligible amount, and nearly 85 percent of the disbursed funds have been repaid by customers.

Regarding the non-performing portfolio, the bank has made a provision of around 88 percent. The bank is currently in the process of recovering funds from these accounts and has already recouped over 20 percent of the claimed and received amount of Rs 917 crore from customers.

The NCGTC initially conducted a sample audit through an independent agency after Bandhan Bank’s second claim. Based on the sample audit, the NCGTC made certain observations, to which the bank provided clarifications. Subsequently, the NCGTC decided to commission a detailed audit of the claims.

On April 5, Bandhan Bank announced that Chandra Shekhar Ghosh will retire after completing his current tenure on July 9. Although the bank’s board had previously approved another three-year term for Ghosh as MD and CEO, the recommendation is still pending with the RBI. However, Ghosh’s decision to step down may render the matter moot.

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