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The Comptroller & Auditor General of India (CAG) has called for strengthening of the credit appraisal mechanism at IFCI Limited, stating that the Government company has not observed the “highest standards” of due diligence in credit appraisal in some of the loan accounts.
IFCI, which is now a Government company, should strictly adhere to its General Lending Policy and should not take recourse to deviations as a matter of routine, the CAG said in a report tabled in Lok Sabha on Friday.
This report titled “Credit Risk Management in IFCI Limited” also recommended that IFCI should strictly comply with the RBI guidelines applicable to Systemically Important Non-Deposit taking Non Banking Financial Companies (NBFCs).
CAG has also said that action for recovery needs to be initiated immediately on default by enforcing the available security.
IFCI should assess the financial position of the borrower company along with that of the “pledgor company/buyback entity” while sanctioning financial assistance, the CAG report added.
As IFCI is a Systemically Important NBFC, it is essential that rigorous standards of appraisal and diligence are followed and due consideration is given to its own financial/commercial interest during the process of appraisal and extension of credit facilities, the CAG has said.
The CAG has highlighted that IFCI had not adhered to its own General Lending Policy in several instances and relaxed various stipulated eligibility criteria pertaining to minimum security cover, financial ratios, stipulated credit rating etc.
The valuation of securities accepted during sanction was not in consonance with the methodology laid down in the General Lending Policy.
Audit observed that lack of due diligence in verification of titles of immovable properties taken as security resulted in failure in enforcement of those securities and safeguarding the mortgaged assets.
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