Sources claim that the NCGTC audit report on Bandhan Bank's microloan book would be released shortly

The bank wiped down Rs 3,852 crore in Q4FY24 to cover the microloans that the NCGTC is looking into.

In the fiscal year (FY) 2020–21, Bandhan Bank paid out over Rs 1,950 crore under the ECLGS and insured a portfolio valued at Rs 20,800 crore under the CGFMU program.

According to persons with knowledge of the situation, who spoke with Moneycontrol, the National Credit Guarantee Trust Company (NCGTC) is expected to submit its audit of Bandhan Bank's claims under the Emergency Credit Line Guarantee Scheme (ECLGS) and Credit Guarantee Fund for Micro Units (CGFMU) at any moment.

The sources said that last week, the audit was virtually finished. According to the sources, the NCGTC looked into important matters and is unlikely to have discovered significant flaws with the bank's microloan book.

In the fiscal year (FY) 2020–21, Bandhan Bank disbursed more than Rs 1,950 crore under the ECLGS and obtained insurance for a portfolio valued at Rs 20,800 crore under the CGFMU program. To get the fullest guaranteed insurance, the NCGTC, however, had identified the loans as either evergreen or in fictional accounts. The process of giving fresh or additional loans to borrowers who are unable to repay their current debts—a technique known as "evergreening"—while hiding the real nature of a non-performing asset (NPA) or bad loan.

Earlier, on May 17, after the announcement of Bandhan Bank's results, Chandra Shekhar Ghosh, the MD and CEO, said in an analyst call that the bank anticipates the CGFMU audit to be finished shortly. "We anticipate a favorable reaction in accordance with the correspondence," Ghosh said. Bandhan Bank wiped down Rs 3,852 crore in Q4FY24 to pay the microloans that were the subject of an NCGTC inquiry.

What is stated in the Credit Guarantee Scheme

Fifteen percent of the entire insured amount is the maximum qualifying amount that a bank may claim under the CGFMU insurance. As of December 2022, the Bank has received and claimed Rs 917 crore from the NCGTC. Since then, the bank has added Rs 1,296 crore to its claim (in Q2FY24).

The bank has already made it clear that the entire amount claimed to date is far less than the highest amount that is available. "It may also be noted that nearly 85 percent of the funds provided have been repaid by customers," the bank said previously.

Regarding the non-performing portfolio, the bank had allocated around 88 percent of its resources. In addition, the bank has already recovered over 20% of the Rs 917 crore in customer claims that it has already received over the course of the recovery procedure from these accounts.

Following the second accusation, NCGTC had first performed a sample audit via an independent agency. "The Bank has clarified some of the points that the NCGTC expressed in light of the sample audit. NCGTC then made the decision to order a thorough examination of the claims, the bank said on February 13.

Ghosh will retire on July 9 after the conclusion of his current term, Bandhan Bank said on April 5. The bank's board of directors gave Ghosh another three-year term as MD and CEO on November 24, 2023. The RBI is still considering the board's suggestion, but with Ghosh's resignation, the issue seems to be moot.