“Fund diversion: Sambandh defaults; internal fraud, says CFO”

BANKING AND FINANCE NEWS OCT 16,2020

The letter dated October 7, also alleges fund diversion by Kindo to other entities named Diya Dairy & Agroprocessors, Kshamta Foundation, Regional Rural Development Centre, DK Enterprises and Utkal Dairy, among others.

 Rourkela-based micro finance institution (MFI) Sambandh Finserve has defaulted on some repayment obligations even as a fraud was discovered at the lender, according to Brickwork Ratings.

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).

 Sambandh did not respond to emailed queries till the time of going to press.

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.

“Banks need artificial intelligence for corporate lending: CEA Krishnamurthy Subramanian”

The CEA said lending to MSMEs (Micro, Small and Medium Enterprises) in the country has remained stagnant for the last 15 years indicating that banks have not developed models to actively lend to the sector.

Indian banking sector needs to use emerging technologies such as Artificial Intelligence (AI) and machine learning for corporate loans for quality lending, Chief Economic Advisor Krishnamurthy Subramanian said on Thursday.

Speaking at a virtual summit organised by Intel and Indian School of Business, he said lending to MSMEs (Micro, Small and Medium Enterprises) in the country has remained stagnant for the last 15 years indicating that banks have not developed models to actively lend to the sector.

“So, the Indian banking sector can really benefit from implementing this (AI and machine learning) especially in the context of corporate lending…And evidence shows that when the better models are employed, banks that employ such models are able to grow their balance-sheets in a very robust manner without suffering quality issues. This is a very important opportunity,” he said.

According to him, banks, including private ones, are using these analytical models primarily in the context of retail lending and have not used much in corporate lending. Subramanian said the use of AI and machine learning in the agriculture sector can enable better crop choice and crop diversification which are one of the key issues that exist in the country.

BY PRAVEEN PARIHAR

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