The technical glitch leading to disbursement of loans without recording of client consent at Bharat Financial Inclusion Ltd (BFIL) was a result of IT change management and process gap, IndusInd Bank said.

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

The Board has constituted a committee to assess staff accountability, if any, arising out of the findings of the report. The portfolio, net of provisions, where consent recording was an issue amounted to ₹8.87 crore as of December 31, 2021, which is 0.03 per cent of the microfinance portfolio.

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“The potential implications of the review findings, including the lapses in product execution and the client consent recording, in terms of income recognition and provisioning requirement is ₹13.5 crore,” the bank further said.

Complaints, allegations

BFIL is the microfinance subsidiary of IndusInd Bank where there were allegations of disbursal of microfinance loans between March 2020 and October 2021, without seeking the consent of the customers.

Following the complaints in November last year, the bank took immediate corrective steps, including conducting an internal audit, IT audit, and discontinuation of OTP-based authentication. It also appointed Deloitte Touche Tohmatsu India to conduct an independent review. The report was submitted to the Board on March 7.

The bank said there were no adverse findings on the product design in respect of compliance with the extant regulatory guidelines. It said its microfinance products require the full collection of arrears or repayment of overdue loan outstanding prior to fresh disbursement to a customer but certain operational issues were highlighted in product roll out.

“In one of the products, introduced to provide liquidity support to customers during the Covid-19 pandemic, the sequencing of collections and disbursements could not be established as both happened on the same day,” it further said, adding that the product was discontinued in September 2021. The lender has on a prudent basis fully provided for the exposure from this product as of December 31, 2021.

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