Spandana Sphoorty Welcomes RBI Guidance During Period of Change and Reflection

Spandana Sphoorty Financial, one of India’s leading microfinance institutions, has come under the Reserve Bank of India’s (RBI) scrutiny following the discovery of operational lapses and potential fraud. The RBI’s nearly three-week-long inspection, far longer than the routine process, reportedly uncovered mismatches in reported cash balances across several branches and unreported frauds, prompting a deeper probe into the company’s management practices.

 

Key Highlights:

 

The RBI inspection carried out in October-November 2024 centered around cash reporting discrepancies and the failure of the top brass to prevent these lapses. This intense monitoring follows a string of operational and compliance issues raised by the regulator.

 

In a leadership shake-up of dramatic proportions, Spandana's board decided to name CFO Ashish Kumar Damani interim CEO following Managing Director Shalabh Saxena's sudden resignation. Saxena will stay on for three months to facilitate the transition.

 

The RBI is also approaching independent directors to review the company's governance structure and internal controls.

 

Spandana has also had past regulatory issues, such as a ₹2.33 crore penalty by the RBI for non-adherence to credit pricing norms and recent violations of financial covenants on borrowings, triggering early redemption applications by debenture holders.

 

Despite these setbacks, the firm has a good capital adequacy ratio and adequate liquidity, but continued stress in the microfinance segment and increasing credit costs continue to be significant risks.

 

The RBI’s ongoing probe and the management overhaul signal a critical juncture for Spandana Sphoorty, with stakeholders closely watching for further regulatory action and recovery measures.

 

Sources: Economic Times, Moneycontrol, CARE Ratings