This Report contains the results of the Performance Audit on the ‘Credit Risk Management in IFCI Limited’. The primary business of IFCI Limited is to provide financial assistance to the manufacturing, services and infrastructure sectors.
Performance Audit was taken up due to existence of high level of Non Performing Assets (NPAs) of Rs. 3544.54 crore as on 31 March 2016corresponding to 13.05 per cent of total outstanding loans. Audit covered a period of four years i.e. from 2012-13 to 2015-16 in respect of loans sanctioned and disbursed. However, for examination of NPAs, loans sanctioned from 2008-09 onwards were covered.
Audit revealed that IFCI did not observe highest standards of due diligence in credit appraisal while sanctioning, disbursing and monitoring some of loan accounts. It did not adhere to its own General Lending Policy in several instances and relaxed various stipulated eligibility criteria laid down for borrowers. Lack of due diligence in verification of titles of immovable properties taken as securities resulted in failure in enforcement of these securities. Audit also observed that valuation of securities accepted during sanction was not in consonance with the methodology laid down in General Lending Policy. Even after occurrence of defaults and loans turning into NPA there was delay in enforcement of security.
Audit also observed violation of guidelines of Reserve Bank of India on provisioning, restructuring and sanction of loan to borrowers in wilful defaulter’s list of RBI/CIBIL.
Audit also found inappropriate credit appraisal/analysis of financials of the company and buyback entity and unsatisfactory loan history or indebtedness of the borrower in some instances of equity investment in other companies. In most of the cases there was default in buyback, exit options were restricted and multiple lending within the group companies was done with weak post sanction monitoring.