ET Now Simran Gil 13 Feb 14
Is the bad loan menance at United Bank of India a cover-up by the bank's management after serious lapses? Sources close to the development say, the report prepared by RBI-appointed forensic audit firm Deloitte suggests serious lapses on the credit appraisal and automated NPAdetection system of the bank. Sources also say that the report suggests that NPAs were not being detected for past two and half to three years.
A senior banker in the know says, "the automated system that detects NPAs was found switched off, whether it was intentional or by mistake remains a big question." TheReserve Bank of India had appointed Deloitte to conduct a forensic audit on the bank.
United Bank of India sent shock waves across the banking sector when it reported gross NPAs at 10.89% in Q3, increasing its bad loans by nearly three times. However, sources in both the government and RBI maintain that the situation at United Bank of India does not pose a systemic risk. The bank has also been instructed to focus primarily on debt recovery and avoid any fresh loans especially on the corporate side.
Though the bank is dire need of capital, sources indicate that the government will not be in a position to infuse funds immediately, and this will most likely have to wait till the new fiscal starts.
UBI posted a net loss of 1238 crore rupees in Q3 compared with 42 cr net profit a year ago. Serious questions have also been raised on the bank's capital position. The bank's tier 1 capital has fallen to 5.6% as of Dec, 2013, which is below the minimum capital ratio stipulated by the RBI
Even in the past questions have been raised on the governance practices at public sector banks. Sources indicate that the RBI had requested the government to appoint a committee on the same, following which PJ Nayak committee to review the governance of bank boards in India was set up in January this year.
Calls to United Bank of India's CMD by ET NOW remained unanswered.
A senior banker in the know says, "the automated system that detects NPAs was found switched off, whether it was intentional or by mistake remains a big question." TheReserve Bank of India had appointed Deloitte to conduct a forensic audit on the bank.
United Bank of India sent shock waves across the banking sector when it reported gross NPAs at 10.89% in Q3, increasing its bad loans by nearly three times. However, sources in both the government and RBI maintain that the situation at United Bank of India does not pose a systemic risk. The bank has also been instructed to focus primarily on debt recovery and avoid any fresh loans especially on the corporate side.
Though the bank is dire need of capital, sources indicate that the government will not be in a position to infuse funds immediately, and this will most likely have to wait till the new fiscal starts.
UBI posted a net loss of 1238 crore rupees in Q3 compared with 42 cr net profit a year ago. Serious questions have also been raised on the bank's capital position. The bank's tier 1 capital has fallen to 5.6% as of Dec, 2013, which is below the minimum capital ratio stipulated by the RBI
Even in the past questions have been raised on the governance practices at public sector banks. Sources indicate that the RBI had requested the government to appoint a committee on the same, following which PJ Nayak committee to review the governance of bank boards in India was set up in January this year.
Calls to United Bank of India's CMD by ET NOW remained unanswered.
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