Rising NPAs: RBI initiates forensic audit at United Bank

Print Posted Date : 29-Nov-2013 , 08:50:05 am | Posted By CASANSAAR

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The Reserve Bank of India has initiated a special inspection of Kolkata-based United Bank of India, apparently prompted by an alarming rise in bad loans that has forced the bank to report a Rs 490-crore loss in the second quarter. While it's not unusual for RBI to undertake such a move, there was speculation about what might have triggered RBI's move. "The bank is sick. So many loan accounts are turning sick. So RBI must be concerned about this and wanted to find out the cause," said a senior ..

No UBI official was ready to come on record to explain the reason behind the move. UBI chief Archana Bhargava couldn't be reached despite several attempts to do so.

RBI inspectors will go through loan accounts and disbursement papers to find out what contributed to the rise in the gross non-performing assets ratio to 7.5% on June 30 from 5.6% in the previous quarter and whether there was any wrongdoing involved, some UBI officials said. RBI may also look into possible diversion of funds, they said. The bank has bad loans ofRs 6,286 crore.

"There is an unprecedented rise in NPAs in UBI. Moreover, the yield on advances has always been on a lower side, reflecting that the risk has not been priced properly," said Vaibhav Agrawal, an analyst with Angel Broking. "Notwithstanding the region-specific loan exposure issues, the rise in NPAs indicated UBI's weak lending standards," he said.

Some officials said the RBI team had been sent at UBI chief Archana Bhargava's behest. "An undercurrent of tension is palpable within the senior management," a mid-level manager said. The bank's net profit has been under pressure for the last three quarters as it had to provide aggressively to cover ever-increasing bad loans. (Economic Times)

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