IndusInd Bank stocks fall over 10% amid reported evergreening of loans allegations; most brokerages keep ratings, targets unchanged

IndusInd Bank Shares corrected over 10 per cent on the Bombay Stock Exchange (BSE) in the Monday's intraday trade to touch day's low of Rs 1,050 after alleged allegations of evergreening of loans.  This comes after an article published in The Economic Times Mumbai edition on November 5, 2021, titled “Whistleblowers Raise Loan Evergreening Issue at IndusInd Arm”.

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Meanwhile, the company denied the allegations in press release and said the article published is grossly inaccurate and baseless. The statements quoted in the report overlook factual aspects, the bank said in the statement.  

The Bank in its statement said:

The Bank strongly denies the allegations of “evergreening”. All the loans originated and managed by BFIL, including during the Covid period which saw the first and second waves ravaging the countryside, are fully compliant with the regulatory guidelines.

The Bank, through BFIL, provides micro loans to women in rural India for income generating activities under the Joint Liability Group format. This customer segment represents the bottom of pyramid in terms of economic wealth and is the target segment for Financial Inclusion.

During the pandemic, the customers faced operational difficulties and some have turned intermittent payers, though a large part of them demonstrated a strong intent to repay on many occasions. Basis the requirements, the Bank adopted a multi-pronged approach depending upon the need of the client:

*Additional liquidity support to the extent of 20% of the outstanding as on Feb 29, 2020 as applicable under the ECLGS scheme

*Restructured loan under applicable regulatory guidelines including extension of moratorium to help tide the immediate cash flow mismatch.

* Additional loan with a longer tenor and lower EWI for customers, after they cleared of their arrears and with their due consent.

*All the loans follow a weekly repayment model and the customers are required to make payments week on week; if there is any default, the same gets recorded as missed instalments. In view of the weekly repayment model, the concept of ever greening is infeasible.

*The NPA recognition process runs on a daily basis; the data from BFIL system flows directly to the centralized NPA system of the Bank, without any manual intervention

Brokerages' Ratings & Targets 

Meanwhile, amid the allegations, major brokerages have maintained their ratings and target for this banking share

Morgan Stanley maintained 'overweight' rating and kept the target unchanged at Rs 1,500 against CMP of Rs 1189, as per Zee Business TV report.  

Similarly, JP Morgan and Nomura also did not revise their targets. While the former maintained 'overweight', the latter kept buy rating for IndusInd Bank shares. Without Chaning targets, JP Morgan and Nomura kept the target prices at Rs 1,400 and Rs 1,360 for the share respectively against CMP of Rs 1,189.