With RBI Governor’s ‘warning’, will AU finally ‘handle’

RBI Guv holds meeting with AU board members, stresses it knows evergreening of NPAs RBI order of ‘action’, if rules are flouted, stares AU!

First India Bureau Jaipur ou must have seen and heard many scams of many banks, but today we are introducing you to some ‘acts’ of AU Bank which is worrying about the security of your money deposited in AU Bank. z What was the whole matter?

In the previous news, First India raised questions on AU Small Finance Bank keeping its NPA stable at 2% for last 5 years. Its financial products are being sold to customers in rural areas or to those with poor civil score or low income group and builders with high risk profile, whose money can sink anytime and NPA can rise anytime. But despite this, the company has stabilized its NPA at 2% which is a matter of investigation.

AU Small Finance Bank was given the status of Scheduled Small Finance

Bank by RBI in 2017. The ‘main-men’ behind AU Bank are Sanjay Agarwal and Uttam Tibrewal who started this bank and now AU Bank has opened more than 900 branches across the country. Meanwhile, there were allegations on AU Bank of showing less NPA. SEBI also approved the IPO brought by AU Small Finance Bank and it was listed in the stock market. If we study the gross NPA figures of AU Bank for the last five years, then the gross NPA percentage of the company in the financial years 2017-18, 2018-19 and 2021-22 has been 2%. While due to Corona it has been told 4.3% in the financial year 202021 and 1.7% in the financial year 2019-20. In such a situation, if indeed this NPA is being kept limited to 2% through their ability and management skills by the ‘kartadharta’ of AU, who made it a bank from a finance company, then this is an shining example of excellent management! But the truth is probably something else. In this case, on the condition of anonymity, a high-level official of the bank disclosed that the bank hid its actual NPA by going against the rules of RBI. In the news published earlier in First India, the entire matter was dis- closed in detail.

Taking cognizance of this whole matter, RBI has issued orders for inquiry and said that suitable action will be taken against AU Small Finance Bank if it is found violating the existing guidelines. Last month, for the first time, the RBI governor had a meeting with the board members of the banks, in which he clearly said that RBI is aware of all the gimmicks that banks uses to hide its bad loans and show profits. It was ac- cepted by RBI Governor Shashikant Das in the meeting that many banks are hiding their actual NPAs by evergreening loans to hide the status of stressed loans.

By now you must have understood the whole story. But now let us introduce you to that thing, through which the black game of hiding NPA is played by banks. What is the evergreening of loan?

Loans that are about to go into the NPA category, the bank gives more loans to the company before default, and then with this additional loan, the company pays its outstanding instalments. In this the cy-

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cle of loans goes on and that loan does not come under the category of NPA. Lender’s loan is adjusted internally or through office accounts.

There have been many such cases besides evergreening, in which some banks have adopted different tactics to hide their NPAs, like banks buying each other’s bad loans, issuance of debt instruments for debt management. To ensure that NPA pressure is less, structured deals are done with bad borrowers from good borrowers, funding debtors’ liabilities using internal or office accounts and hiding NPA by giving loan directly or to any subsidiary before due payment to settle old loans, are some of the old ploys.

Let us tell you that through a special circular, the money of various government schemes deposited in government banks was transferred from government banks and deposited in AU bank. In such a situation, if RBI takes some action against AU bank, then what will be the future of that govt money?

It remains to be seen whether RBI is able to reveal in its investigation the various tactics being adopted by AU Bank to stabilize its NPA after the RBI Governor’s admission.

ity First presents somemore glimpses from the Education Summit, which was held in Jaipur at Hotel Crowne Plaza on Friday. The event was organized by First India & Bharat24. P10-11