Odisha-based NBFC faces ₹251-crore fraud2 min read . Updated: 16 Oct 2020, 07:38 AM IST
- Sambandh Finserve Pvt. Ltd is under an internal probe
A ₹251-crore fraud at a small Odisha-based non-banking financial company has put the spotlight back on how “bogus accounts" are used to divert funds for money laundering.
Sambandh Finserve Pvt. Ltd, a micro-finance institution, has told a rating agency that it defaulted on its repayments because of a fraud in its books. The company with debt of ₹433 crore is undergoing an internal probe ordered by its board.
The actual assets under management (AUM) is approximately ₹140 crore, while the reported figure was ₹391 crore as on 30 September, said four senior company executives in a letter to the board on 7 October. “The reported AUM is inflated and non-existent. The gap is approximately ₹251 crore," they alleged. A copy of the letter was reviewed by Mint.
The gap in portfolio was managed by fictitious disbursements, subsequent withdrawals and deposited as fictitious collections under the direction of the CEO (Deepak Kindo), the executives alleged. This was going on since FY16 and the gap has gone beyond control, they added.
An email sent to Sambandh remained unanswered.
“There is also pilferage in the cash withdrawn for disbursement by the managing director and CEO and diverted to other entitles, namely Diya Dairy and Agroprocessor Pvt Ltd, Kshamta Foundation, Regional Rural Development Centre, DK Enterprises, Utkal Dairy, and other unknown entities."
The alleged fraud came to light after the NBFC defaulted on its bank loan repayment in October and Brickwork Ratings downgraded the ratings to default category.
Subsequent to the lender’s feedback, Brickwork on 13 October said it had a brief telephonic discussion with the company’s chief financial officer, who said some internal fraud was discovered at the end of September “wherein large quantum of bogus loans entries were made in the books of accounts".
Out of its total debt of ₹433 crore, ₹383 crore is in the form of loans from State Bank of India, Yes Bank, Bandhan Bank, Axis Bank, DCB Bank, ICICI Bank, Northern Arc Capital, Small Industries Development Bank of India and other financial institutions.
“It is surprising that some of the micro lenders Sambandh raised money from were not able to realize that the loanbook was allegedly inflated. Some of the large private and public sector banks that have exposure to the company might not have that kind of ground-level intelligence, but the micro lenders should’ve known about this incident," said an analyst requesting anonymity. About 95% of micro-finance loan disbursements happen directly into accounts and ticket sizes are about ₹25,000, he added.
“If such a substantial portion of the loan book is alleged to be fraudulent, it is anybody’s guess as to how many fictitious loan accounts would have been created," he said.