The finance ministry has asked United Bank of India (UBI) to identify executives responsible for the lender's failure to spot swelling bad debt, resulting in a loss at the Kolkata-headquartered lender in the December quarter.

 

The move comes as the ministry has mandated all state-run banks to depend on a computer-generated list of non-performing assets (NPAs) and it fears that executives at UBI may have tampered with the system, resulting in a pile-up of sticky loans over the past few years. The bank reported a loss of over Rs 1,200 crore during the December quarter.

"UBI has to fix responsibility. We have asked them to find out how the system did not throw up alerts and who was responsible," said a senior government official, adding that there was no risk to the financial system or to consumers. In addition, the ministry has asked to go slow on big-ticket loans and focus on recovery of loans, while maintaining that there is no need for an immediate fund infusion.

In a statement released on the BSEombay Stock Exchange, UBI said there was no intentional intervention to hide NPAs and blamed Finacle, the widely used software for banks from Infosys. "The Finacle system has inherent deficiencies...

The generation of NPA through system in September-December 2013 has given rise to a large number of standard accounts shown as NPA and NPA accounts shown as performing assets. The weakness of the tool used by the bank previously and also in the tool used in September-December 2013 largely explains variation in NPA figures," it said.

On its part, Infosys, which has developed the widely-used Finacle software for banks, rejected the charge. "We wish to firmly state that the solution has the proven ability and framework required to address the asset classification and NPA reporting as per the IRAC norms prescribed by RBI. Majority of banks in India, who run on Finacle, have leveraged this facility and are successfully managing their asset classification and NPA reporting. Additionally, from time to time, we provide enhancements in the features for our customer banks to test and deploy in their environment to meet their business requirements. UBI through their application service provider HP have recently approached us with a request to implement this in their environment and we are helping the bank in this regard," it said in response to a query from TOI.