The Comptroller & Auditor General of India (CAG) has called for strengthening of the credit appraisal mechanism at IFCI Ltd, 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, CAG said in a report.
The 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 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 “pledger company/buyback entity” while sanctioning financial assistance, the report added.
The auditor 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.