E&Y Conducts Audit on Bandhan Bank's Microfinance Borrower Accounts

Ernst & Young (E&Y) is currently conducting an audit on Bandhan Bank’s 51 lakh microfinance borrower accounts. This audit is part of the bank’s mandate to examine loans worth Rs 22,750 crore against which insurance claims were sought from the government.

Chandra Shekhar Ghosh, the managing director of Bandhan Bank, has denied any irregularity in these accounts or the practice of evergreening loans.

In an interview, Ghosh reassured stakeholders, stating, “The audit issue is taking time to resolve because it involves a humungous 51 lakh borrower accounts. Stakeholders should not worry about it.”

These loans are backed by two separate government guarantee schemes. Ghosh emphasized that the bank follows a business model where fresh loans are offered only after full repayment of existing loans. During the COVID-19 pandemic, emergency loans were provided on top of existing loans to help borrowers tide over the crisis under the Emergency Credit Line Guarantee Scheme.

Bandhan Bank has insurance cover under the Credit Guarantee Fund for Micro Units against Rs 20,800 crore of microfinance loans disbursed in FY21. Additionally, over Rs 1,950 crore was disbursed under the Emergency Credit Line Guarantee Scheme in the same year.

Ghosh highlighted that the bank continues to recover dues from loans against which insurance claims are made. This recovery will be adjusted when the government pays the next phase of insurance claims.

Although the bank received Rs 917 crore from the National Credit Guarantee Trustee Company in December 2022, an additional claim of Rs 1,296 crore made in the second quarter of FY24 is subject to the audit’s result. The total claimed amount so far is much lower than the maximum eligible amount, which is 15% of the total amount involved.

Ghosh mentioned that Rs 214 crore, one-fourth of the insurance claim received from the government, has been recovered and will be adjusted against the next payment. Initially, a sample audit was conducted by NCGTC after the second claim. However, it has now decided to conduct a full-fledged audit on the entire claim.