IndusInd Bank was in the news recently due to some media reports. It was said in these reports that the microfinance subsidiary of the bank disbursed 84 thousand loans without the consent of the customers. This was disclosed in the letter written by the whistleblower to the bank management and RBI, in which it was said that the loans have been evergreening and loans were disbursed without the consent of the customers. The bank admitted that this mistake had happened. These loans were disbursed due to technical glitch. But the bank denied that the loan has been evergreening. If a customer is unable to repay the loan and despite this, giving him more loan is called Evergreening.
Clearance given for alleged irregularities in microfinance loan
But despite this alleged disturbance, brokerage firm Jefferies has expressed confidence in the shares of the bank. The bank’s management has clarified on the alleged irregularities in disbursement of loans by its subsidiary BFIL. Bank Management says – 1. The 20 percent liquidity of the loan is under the government’s ECLGS. This is 2 per cent of the microfinance loan i.e. Rs 6 billion. 2. Restructured loans account for 3 per cent of microfinance loans. 3. Loans with longer tenure or lower EMI were given to those who had already repaid loans worth $7 billion.
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Jefferies retains BUY rating with a target price of 1400
Brokerage firm Jefferies says that the bank had accepted technical glitches in the case related to distributing 84 thousand loans without consent. This is just 0.1 per cent of its microfinance loans. The bank management can conduct an independent audit to investigate the matter. Jefferies has said that it will keep an eye on the development of the microfinance segment. It has retained its estimate on its earnings. The brokerage firm has retained the BUY rating of this stock and has set a target price of Rs 1400.
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