The Forensic Audit Controversy at Bandhan Bank

Bandhan Bank, a prominent banking institution based in Kolkata, has recently found itself at the center of a controversy. The issue revolves around a forensic audit of loan claims filed under the Credit Guarantee Fund for Micro Units (CGFMU) scheme. Read the full details about Forensic Audit Controversy at Bandhan Bank below

The Role of NCGTC

The National Credit Guarantee Trustee Company (NCGTC), established in 2013-14 under the Union Ministry of Finance, is a key player in this scenario. The NCGTC oversees and manages different credit guarantee trust funds. It currently handles nearly a dozen funds to support the flow of credit to various sectors, including students, women, and MSMEs, by offering a guarantee to banks and other lending financial institutions.

The CGFMU Scheme

The CGFMU is one of the schemes managed by the NCGTC. It offers portfolio guarantees for collateral-free micro loans up to Rs 10 lakh sanctioned by banks, NBFCs, and MFIs under the Pradhan Mantri MUDRA Yojana (PMMY). It also covers overdraft facilities up to Rs 10,000 under Pradhan Mantri Jan-Dhan Yojana (PMJDY) accounts. And also self-help group (SHG) loans ranging from Rs 10 lakh to Rs 20 lakh. Bandhan Bank has taken the guarantee cover for micro loans under this particular scheme.

Bandhan Bank’s Claims

Bank has claimed losses of ₹2,600 crore for loans given out under the Emergency Credit Line Guarantee Scheme (ECLGS). Of this, the lender has already received ₹917 crore. The bank paid a guarantee fee under CGFMU of Rs 213.71 crore in FY23. Which is significantly higher than Rs 9.89 crore in FY22.

The Audit by NCGTC

The NCGTC has decided to conduct a detailed audit for the CGFMU portfolio of FY21. This is not a regulatory audit but an examination of the CGFMU claim made by the bank.

Impact on Bandhan Bank

This controversy has impacted investor sentiment, causing the bank’s stock to fall. However, the bank has clarified that this is not a regulatory audit, which has helped the shares recover.

Conclusion

In conclusion, the forensic audit controversy at Bandhan Bank has brought to light the complexities of the CGFMU scheme and the role of the NCGTC. It remains to be seen how this situation will unfold and what impact it will have on the bank and its stakeholders. The bank has extended its full cooperation in the proposed audit. Bandhan Bank is confident that it will get recovery of the claim initiated. After receiving the first tranche of recovery from the CGFMU, Bandhan Bank had applied for a second tranche of about Rs 1,290 crore. Based on the preliminary audit findings, the bank has given detailed explanations along with the process followed in support of the claim to NCGTC.

Despite the initial fall in stock prices, the bank’s shares rose as much as 3.17% after the bank’s clarifications. For the quarter ending December, the bank reported a growth of 18.6% in its loans and advances.