Reserve Bank of IndiaBefore cancelling their license, Reserve Bank of India (RBI) has issued a show-cause notice to fraud-hit Sambandh Finserve Pvt Ltd.
According to an exclusive report by Moneycontrol, this happened after Sambandh Finserv Pvt Ltd lost its networth below the regulatory minimum and its financial situation worsened beyond redemption over the recent months
In October last year, a report by Brickwork Ratings said that the Odisha-based microfinance institution (MFI), Sambandh Finserve, defaulted on some repayment obligations even as a fraud was discovered at the lender.
The agency downgraded the MFI to ‘D’ or default grade after it was intimated by a lender of missed repayments on October 10. The rating agency said, “…based on the information provided by one of its bankers, the outstanding ratings of the company have been downgraded in conformity with extant guidelines of RBI on default recognition.”
The MFI owes banks and non-bank lenders Rs 433 crore, of which Rs 383 crore is in the form of fund-based term loans and Rs 50 crore are non-convertible debentures (NCDs).
The rating report by Brickwork Ratings stated that in a telephonic discussion with the rating agency, the CFO of Sambandh conceded there had been some internal frauds unearthed at the end of September 2020, wherein a large quantum of bogus loan entries were made in the book of accounts of the company.
A letter from senior executives at Sambandh to the MFI’s board, stated the MFI’s actual assets under management (AUM) as on September 30, 2020, were Rs 140 crore against the reported figure of Rs 391 crore. The Rs 251-crore hole was allegedly managed by “fictitious disbursement, subsequent withdrawals and deposited as fictitious collections” on the directions of MD and CEO Deepak Kindo and the practice is understood to have been on since FY16.
The letter dated October 7, also alleged fund diversion by Kindo to other entities named Diya Dairy & Agroprocessors, Kshamta Foundation, Regional Rural Development Centre, DK Enterprises and Utkal Dairy, among others.