IndusInd Bank row: Shalabh Saxena, Ashish Damani resign; to assist the bank in the review of transactions at BFIL

Hinduja-owned IndusInd Bank today said Shalabh Saxena and Ashish Damani, currently employed with IndusInd Bank-owned Bharat FI as the Managing Director & CEO and the Executive Director & CFO, respectively, have tendered their resignations after emails addressed to the Chairman of the Board of BFIL on November 25, 2021.

The private bank, through its wholly-owned subsidiary BFIL, provides microloans to women in rural India for income-generating activities under the joint liability group.

The bank said both have offered their assistance in the "ongoing review of transactions related to BFIL". For that, it said, an international audit firm has been appointed to conduct an independent review and ascertain the veracity of the anonymous complaints.

"The Board of BFIL has deferred consideration of the decision to relieve them until the completion of the ongoing review," IndusInd Bank said.

Also read: IndusInd Bank refutes whistleblower claims; admits 84,000 loans disbursed without customer consent

In the meanwhile, the Bank has nominated J Sridharan, who has over two decades of experience in managing finance, governance and MIS functions, as Executive Director on the Board of BFIL. It has also appointed Srinivas Bonam, who has over two decades of experience leading inclusive banking and microfinance businesses, to oversee the day-to-day functioning of BFIL.

It said MR Rao continues to be associated as an advisor to BFIL, bringing his years of experience in microfinance and scaling up BFIL. It has also appointed KV Rao, former Chief Operating Officer and Head Member Services for 11 years at BFJL, as an advisor for strengthening the field processes.

Whistleblower complaints on loan evergreening at IndusInd Bank

Recently, NBFC player Spandana Sphoorty Financial Ltd had announced the appointment of Shalabh Saxena as its new MD and CEO. Objecting to the appointment, IndusInd Bank had said Saxena was yet to resign from its subsidiary BFIL and can't accept employment at a rival microfinance company.

IndusInd Bank had also objected to the appointment of Ashish Damani as Spandana Sphoorty's President and CFO as he was then serving in the capacity of BFIL Executive Director and Chief Financial Officer.

The bank has said it's in the process of reviewing the whistleblower complaint on "loan evergreening" and disbursal of around 84,000 loans, which presumably happened due to a technical glitch and without the consent of customers.

Also read: IndusInd Bank refutes whistleblower claims; admits 84,000 loans disbursed without customer consent

The continued employment of "Shalabh Saxena and Ashish Damani at BFIL" is critical to the closure of such a process, the bank had said on November 23, adding that they can't be relieved from the services of BFIL, until completion of the said review.

IndusInd Bank's wholly-owned subsidiary BFIL is facing serious allegations of evergreening of loans by whistleblowers.

On November 5, there was a media report about anonymous whistleblowers writing to IndusInd Bank's management and the Reserve Bank of India (RBI) about BFIL, the microlending-focused subsidiary of the bank, allegedly resorting to evergreening of loans, wherein existing borrowers unable to pay dues were given new loans to present the books as clean.

The bank strongly denied the allegations of "evergreening", saying they were fully compliant with the regulatory guidelines. It, however, clarified that "due to a technical glitch in May 2021, nearly 84,000 loans were disbursed without the customer's consent getting recorded at the time of loan disbursement".

"This issue was highlighted by the field staff within two days and the technical glitch was rectified expeditiously. Out of the above, only 26,073 clients were active with the loan outstanding at Rs 34 crore, which is 0.12 per cent of the September-end portfolio," said the bank.

The bank has also sought an independent review to see if there is any process lapse or accounting failure at BFIL. The banking regulator, the Reserve Bank of India (RBI), too, is monitoring the developments at the bank.

Also read: The curious case of two of IndusInd Bank's key people amid whistleblower allegations