MC clarifies. An investigation is underway over Bandhan Bank's loan of Rs 23,300 crore. This is the reason

MC clarifies. An investigation is underway over Bandhan Bank's loan of Rs 23,300 crore. This is the reason

Bank

Under the government's credit guarantee programs, the bank's loan portfolio is examined to look for window dressing or evergreening.

A forensic investigation is being carried out by the National Credit Guarantee Trustee Company (NCGTC) on loans totaling about Rs 23,300 crore that Bandhan Bank has issued under government credit guarantee programs.

According to NCGTC, the bank either constructed fictitious accounts to get the highest guarantee protection or the loans were evergreen. According to a document that Moneycontrol was able to get, the auditor will examine portfolio data to determine whether loans are evergreening.

What does this signify? Why is NCGTC interested in auditing these loans? What is the statement from the bank? Continue reading to learn more:

Forensic auditing: What is it?

Examining and assessing a company's financial data in order to gather information is known as forensic audit.

How big are the debts that NCGTC intends to examine?

The loan guarantee programs fall within the CGFMU and ECLGS categories.

Credit Guarantee Fund for Micro Units (CGFMU): A loan of Rs 20,800 crore for about 29 lakh borrowers. Micro and small businesses may apply for loans without collateral under this category.

ECLGS: During the COVID-19 crisis in 2020, the Atmanirbhar Bharat package included loans totaling around Rs 2,500 crore to about 22 lakh borrowers under the Emergency Credit Line Guarantee Scheme (ECLGS).

Does the bank guarantee coverage against losses in the event that a borrower defaults on these loans?

Indeed, but not with regard to tire volume. The whole claim payment percentage for CGFMU has been set at 15% of the initial amount approved. This indicates that the bank may only get up to Rs 100 crore, or 15% of Rs 20,800 crore, in total.

There is a 100% warranty against any loss for ECLGS.

Under each of these systems, are all accounts categorized as non-performing assets?

No, under CGFMU, loans totaling Rs 4,000 crore from over 5.5 lakh borrowers have been labeled as non-performing assets.

Roughly 7.55 lakh borrowers totaling Rs 955 crore have been designated as non-performing assets (NPAs) under ECLGS.

If the loan is not repaid within 90 days, it becomes non-performing assets (NPA).

Why does NCGTC want to conduct a portfolio-wide audit?

The NCGTC believes that Bandhan Bank made up accounts in order to seek for maximum guarantee protection under the ECLGS and CGFMU programs. Also, it worries that a few loans made via the CGFMU program were evergreen.

Evergreening is the practice of giving fresh or additional loans to borrowers who are unable to pay back their current debt, hiding the fact that the loan is really non-performing or bad.

Where do these debtors mostly reside?

Kolkata is home to Bandhan Bank's headquarters. The majority of loans, according to NCGTC, are in West Bengal, Assam, and Odisha.

What is the statement from the bank?

The outstanding portfolio qualified to receive insurance was Rs 20,800 crore under CGFMU and Rs 2,000 crore under ECLGS, the bank said during the results call.

It said that 85% of the portfolio had been returned by borrowers and that claims had been made for Rs 3,600 crore that was in danger of default.

"The bank is making ~90 per cent of the outstanding allowances on these stressed loans," according to management.

The bank made 2,200 crore worth of claims in total. Under Tranche I, Bandhan Bank has already been paid Rs 920 crore; however, Rs 220 crore of that amount still has to be reimbursed since the borrowers have made further payments.

After the NCGTC audit is over, the bank hopes to get the Rs 1,300 crore it submitted a claim for in tranche 2.

How much time does the audit take?

It is anticipated that the audit would take around ninety days.

What was the bank's December quarter performance like?

From 1.9% of total assets to 2.2% of total assets in Q3FY24, Bandhan Bank's net non-performing assets rose. NCGTC may have an extremely high NPA if its statements are accurate. To Rs 733 crore, net profit more than quadrupled.