The technical issue leading to loan disbursement without registration of customer consent at Bharat Financial Inclusion Ltd (BFIL) was the result of IT change management and process gap, IndusInd Bank said.

An independent review by Deloitte also highlighted some areas of improvement in the process and oversight of the subsidiary’s correspondent banking activities, including in technology and control, the bank said in a stock filing.

The Board has established a committee to assess staff liability, if any, arising from the findings of the report. The portfolio, net of provisions, where registration of consent was an issue stood at ₹8.87 crore as of December 31, 2021, or 0.03% of the microfinance portfolio.

“The potential implications of the findings of the review, including failures in product execution and recording of customer consent, in terms of revenue recognition and provisioning requirement are ₹13.5 crore” , the bank added.

Complaints, allegations

BFIL is the microfinance subsidiary of IndusInd Bank where there have been allegations of disbursement of microfinance loans between March 2020 and October 2021, without seeking consent from clients.

Following the complaints in November last year, the bank took immediate corrective action, including conducting an internal audit, an IT audit and stopping OTP-based authentication. It has also appointed Deloitte Touche Tohmatsu India to carry out an independent review. The report was submitted to Council on March 7.

The bank said there were no adverse findings on the design of the product with respect to compliance with applicable regulatory guidelines. It said its microfinance products require full collection of arrears or repayment of delinquent loans before further disbursement to a client, but some operational issues were highlighted during the rollout of the product.

“In one of the products, introduced to provide liquidity support to clients during the Covid-19 pandemic, the sequencing of incomings and outgoings could not be established because both occurred on the same day” , he added, adding that the product had been discontinued. in September 2021. The lender has, on a prudent basis, fully provisioned the exposure of this product as of December 31, 2021.

Published on

March 09, 2022