The rise in non-performing assets of UBI is not a sudden event. It is a collection of NPAs over a period of time that was not faithfully reported by the bank, said Rajiv Takru, secretary, department of financial services.
In an interview with The Indian Express, Takru said the finance ministry has now asked UBI to begin an administrative inquiry into the misreporting and take corrective action based on its findings. We have asked them to look into the issue. If we feel that their inquiry is not sufficient, we will begin a review, he said.
Meanwhile, UBI has also worked out a strategy to recover its NPAs of up to Rs 2,000 crore and has submitted the plan to the finance ministry. The lender has been directed to focus all efforts on recovery of dues and take strict action against willful defaulters. The Kolkata-based bank reported losses of Rs 1,238 crore for the third quarter this fiscal, more than double the loss of Rs 489 crore in the second quarter. It also has the highest gross NPA among all listed banks at 10.8 per cent. Net NPAs for UBI amounted to Rs 5,630 crore or 7.44 per cent by December end 2013 as against 5.39 per cent in the previous quarter.
The emergence of a problem is not bad by itself as it allows us to address it, he said. Based on UBI recovery efforts, the government will take a call on capital infusion. It was one of the top beneficiaries of capital infusion this fiscal and received Rs 700 crore from the finance ministry.
The RBI has also restricted the banks loan sanctions to Rs 10 crore. We want it to focus on small retail loans and not go after large corporates, where chances of defaults are higher, Takru said, adding that this will enable the bank to also meet priority sector lending targets.
The banking secretary also maintained that UBI would continue to be a government led bank and there would be no erosion of its deposits. Ratings are not relevant. The bank should be relevant to its customers, he said. Concerned by weakened asset quality and earnings profile of the bank, rating agencies Icra and Crisil had last week downgraded its bonds.