EY Conducts Forensic Audit on Bandhan Bank’s Loan Book: Amidst recent developments in the Indian banking sector, Big-Four accounting firm EY has initiated a forensic audit of a segment of Bandhan Bank’s loan portfolio, which was backed by government guarantees. The National Credit Guarantee Trustee Company (NCGTC) has mandated this in-depth scrutiny, encompassing loans exceeding ₹23,000 crore from the private lender.
The audit aims to ascertain whether the bank utilized two distinct government guarantees for the same set of loans, triggering interest from regulators and investors due to concerns about fund deployment. It also aligns with NCGTC’s objective to ensure transparency and compliance within the credit guarantee trust funds managed by the entity.
Notably, Bandhan Bank’s executive director, Ratan Kumar Kesh, disclosed that the bank availed the Credit Guarantee Fund for Micro Units (CGFMU) cover in the fiscal year 2020-21, amid the COVID-19 pandemic. The bank disbursed substantial amounts under CGFMU and the Emergency Credit Line Guarantee Scheme (ECLGS), prevalent during the pandemic to aid specific sectors.
Furthermore, the ongoing audit is urged to delve into various aspects such as detecting any irregularities involving fictitious customers, identifying potential window-dressing of loans, assessing the eligibility of the loan portfolios for government schemes, and probing into the source of overdue repayments from borrowers participating in the schemes.
Additionally, the audit is expected to encompass an extensive review of Bandhan Bank’s internal controls, operational policies, and regulatory compliance to ensure adherence to prescribed guidelines.
In response to the preliminary sample audit conducted earlier by NCGTC, Bandhan Bank promptly provided detailed explanations and outlined the procedures associated with the claims in question. It’s important to emphasize that this detailed audit is not an initiative directed at the bank by the regulator, as clarified by the bank in a filing with stock exchanges.
These developments have significantly impacted Bandhan Bank’s positioning in the market, with its shares reflecting a 7.21% decline in response to these unfolding events.
This sequence of events underscores the intensified scrutiny within the banking sector and amplifies the need for robust governance and compliance mechanisms to uphold the integrity and stability of financial institutions.
Stay tuned for updates as the situation evolves.