Shares of Bandhan Bank have recovered some of the losses from Monday after the company clarified that the ongoing audit of its books is not initiated by the regulator i.e. the Reserve Bank of India (RBI).
Why is Bandhan Bank being audited?
The government of India had promised to compensate lenders for losses arising from the emergency loans given during the pandemic year i.e. financial year ending March 2021.
The Kolkata-based Bandhan Bank has claimed losses ₹2,600 crore for loans given out under the Emergency Credit Line Guarantee Scheme (ECLGS). Of this, the lender has already got ₹917 crore.
The bank had sought for another ₹1,290 crore as a second tranche of compensation. However, the process of compensation is subject to an audit because the compensation exceeds ₹1,000 crore.
The rumour on the street was this process would include a forensic audit by the RBI, which would imply that the regulator suspects foul play. This fear took the stock down 8% on Monday (January 8).
However, today (January 9) the company has clarified today that this audit is to be conducted by Credit Guarantee Fund of Micro Units (CGFMU). CNBC-TV18 had reported the same, a day earlier, citing sources.
CNBC-TV18 newsbreak is confirmed. Bandhan Bank issues clarification on reports related to an audit.@bandhanbank_in says, it's not a regulator-initiated audit. The audit is being done by National Credit Guarantee Trustee for the 2nd tranche of CGFMU claims of ₹1,290 cr pic.twitter.com/QCRLhIkalq
— CNBC-TV18 (@CNBCTV18Live) January 9, 2024
Following this clarification, the shares of Bandhan Bank jumped more than a percent and a half because the street is relieved that the RBI is not involved in the audit.
“The Bank has clarified this information out of an abundant cautious approach and in line with the governance practices being followed by the Bank,” it said.
What is the Credit Guarantee Fund?
This is a government of India initiative that guarantees loans given by banks to micro, medium and small enterprises. Lenders are compensated for any unpaid loans given under this scheme.
In the financial year ending March 2023, the fund had guaranteed loans worth ₹1 lakh crore.
(Edited by : Sriram Iyer)
First Published: Jan 9, 2024 11:15 AM IST
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