Even as it gave a clean chit to Dewan Housing Finance Corporation (DHFL) and its promoters on newsportal CobraPost’s allegations, independent audit firm TP Ostwal & Associates has highlighted issues such as ‘significantly inadequate’ monitoring of 15 large accounts, and certain instances of deviations and non-adherence to the terms of sanction of loans.

TP Ostwal & Associates, which examined the allegations, in its report said certain lapses and departures from the standard operating procedures (SOPs) and policies laid down by the company have been identified.

These lapses point to deficiency in adherence to the policies in several instances, the risk of which needs to be examined by the company, it added.

The report elaborated: “Though the company is required to monitor post-disbursal end-use of funds by the borrowers, our examination indicates the monitoring in respect of 15 borrowers (loans amounting to ₹7,485 crore) is ‘significantly inadequate’.

“The records do not indicate that the Risk Management Committee undertook ongoing monitoring of compliance with exposure ceilings prescribed by the regulator. However, compliance with prudential norms for exposure is tested at the time of sanction of loans by the operational teams.”

The firm observed that there were certain instances of deviations and non-adherence to the terms of sanction of loans having major risk implications, especially in relation to post-sanction monitoring of fund use by borrowers.

As such, non-compliance with the terms of the borrowing and, possible diversion of funds, if any, by the borrowers, would have escaped attention of the company, it added.

Finance committee

Referring to the composition of the Finance Committee (consisting of Kapil Wadhawan & Dheeraj Wadhawan, both promoter-directors, and one independent director), which sanctions loans that exceed ₹200 crore, the report observed that the promoter-directors can be said to have significant influence in the loan sanction process for loans exceeding ₹200 crore.

“In the absence of any evidence to suggest influence, we believe that their decisions are within the framework of the provisions of the Companies Act, 2013, and National Housing Bank (NHB). It should also be noted that the minutes of the Finance Committee’s meetings are placed before the board in subsequent meeting, for taking on record,” the firm said.

Clean chit

The audit firm said the company has not promoted any of the alleged 26 shell companies that are borrowers. “We were unable to find evidence to support the allegations that the promoters have concealed shareholding in the company, neither did we find any evidence to support the allegation of insider trading,” said the report.

The firm found the allegation of political considerations in connection with certain lending to be baseless and without merit – there was no nexus between loans sanctioned and timing of the elections.

All of such loans were, in fact, not sanctioned before or during either the Gujarat (December 2017) or Karnataka (May 2018) State elections.

The firm also did not find evidence to corroborate or support allegations of tax fraud perpetrated by the company, or violations of various other statutes.