The Reserve Bank of India (RBI) has pulled up PTC India Financial Services (PTC India Financial) for deviating from loan sanction norms and according “excess discretionary power” to a former top official, a Moneycontrol report said on Friday.
The company’s practices have, in turn, raised concerns over risk management and the robustness of its governance framework, RBI reportedly said in its risk assessment report.
The Risk Assessment Report and the Inspection Report on the company as of March 31, 2022 was sent to the company on August 17, 2023.
The non-bank lender is a subsidiary of PTC India. The company has come under the regulator’s scanner since three independent directors KS Vikamsey, Thomas Mathew and Santosh B Nayar resigned in January 2022, citing lapses in governance and compliance.
Subsequently, PTC India independent director Rakesh Kacker also resigned from the board owing to concerns over corporate governance at the infrastructure finance subsidiary.
While PTC India Financial and its parent have denied these allegations, the former appointed an independent firm to undertake a forensic audit of its financials.
In addition to other observations, the forensic audit report notes instances of modification of sanction terms, non-compliance with pre-disbursement conditions, disbursements made for clearing overdues or evergreening, disproportionate disbursement of funds and delayed presentation of critical information to the board.
Two more independent directors had resigned in December 2022 over a spate of issues, including divergent views of the directors and management on the outcome of forensic audit report, limitations on scope of forensic audit and lack of cooperation from the management to the forensic auditor.
While declaring its March quarter result, the non-bank lender said that it is in correspondence with the Securities and Exchange Board of India (Sebi), stock exchanges, RBI and registrar of companies over contents of the resignation letter, and the forensic audit report.
In June, the company announced that its managing director and CEO Pawan Singh went on leave, in line with the directive of the RBI.
Subsequently, it has appointed director (finance) and chief financial officer Mahendra Lodha as interim managing director and chief executive officer.
In its initial probe, Sebi found both Singh and PTC India financial chairman Rajib Mishra responsible for corporate governance lapses.
In the latest assessment and inspection report, RBI reportedly mentioned deeper operational issues at the non-bank lender, in addition to corporate governance lapses. These issues are being probed by Sebi and the ministry of corporate affairs.
Know-your-customer mismatch, policy violations and data inconsistencies are some of the issues flagged by the RBI report. The central bank has asked PTC India Financial to present the report to its board within 60 days and come up with a time-bound risk mitigation plan.