EY conducts forensic audit on Bandhan Bank loans totaling ₹23,000 crore

In a major development, the Big Four accounting firm EY is currently undertaking a forensic audit on a section of Bandhan Bank's loan portfolio, particularly those supported by government guarantees.The audit was commissioned by the National Credit Guarantee Trustee Co. (NCGTC), a state-run entity that operates and manages various credit guarantee trust funds of the government. It will cover Bandhan Bank’s loans of around ₹23,000 crore. NCGTC has asked EY to check whether the bank used two different government guarantees for the same set of loans, find fake borrowers if any; identify window-dressing or evergreening of loans, and check whether the loans were ineligible for the government schemes.

Experts said regulators and investors generally conduct such an audit when there is suspicion about the manner in which a company has used funds.r Bandhan Bank on February 12 said the bank is confident that its claims from credit guarantee fund for micro units (CGFMU) will be settled favourably, even as the audit by National Credit Guarantee Trust Company (NCGTC) is ongoing. Bandhan Bank had taken insurance of the portfolio of Rs 20,800 crores under the CGFMU scheme and disbursed over Rs 1,950 crore under the Emergency Credit Line Guarantee Scheme (‘ECLGS’) in FY 2020-21. The Kolkata-based lender said it is fully cooperating with the agency on the audit.The stock of Bandhan Bank was sharply lower by more than seven percent to Rs 199 per share on February 12. The shares price is down 12 percent in the past one month as against a 1.8 percent drop in the benchmark Sensex due to a mix of factors, including concerns on asset quality and the overhang of NCGTC audit.This isn't the first time Bandhan Bank has had to clarify on the NCGTC audit. Last month too, the bank had issued a similar clarification saying the NCGTC has decided to conduct a detailed audit for the CGFMU portfolio of financial year 2020-21, but had asserted that this isn’t an audit by the regulator.