UBI crisis: Finmin action on RBI, Deloitte & panel reports soon

Written by fe Bureau | New Delhi | Updated: Mar 12 2014, 19:30pm hrs
The finance ministry said on Tuesday it has received the administrative inquiry report on the crisis at the Kolkata-based public sector lender United Bank of India, and will soon take necessary action based on the report, as well those given by RBI and consultancy firm Deloitte.

We have received the (administrative inquiry) report and it is under examination. It is more or less on lines of the reports by the RBI report and Deloitte. We will take necessary action (on the basis of these reports), financial services secretary Rajiv Takru told FE.

According to sources, RBI's inspection of the bank's operations had found serious governance failures. The RBI report, which includes corrective actions to be taken at the bank to help it overcome the present crisis and preventive steps to avoid similar problems in the future, said the senior management and Board did not perform and deliver results as expected. This, in turn led to a sudden rise in the banks non-performing assets (NPA). The Deloitte report had found the failure of the banks early warning system to detect risks as well as inefficiency of its staff had resulted in a rise in NPAs. It is learnt the Deloitte report had found the bank deliberately under-reported its NPAs.

In the United Bank case, RBI had submitted its report, which incorporated the findings of the Deloitte report as well to the finance ministry. The report suggested various options to turnaround the bank, including superceding of its board. The ministry had made it clear that such a decision would be taken only if the administrative inquiry ordered by it finds incriminating evidence against Board members.

Sources said after RBI gave its report, which also indicted then chairperson and managing director Archana Bhargava, to the finance ministry, she had no option but to step down. FE had reported earlier that the Centre had decided to revamp the senior management and board of the bank and strengthen it by appointing experts who are willing to take up the challenge of joining the bank and effect a turnaround.

Due to a fresh slippage of R3,172 crore, UBI's gross NPA had risen to R8,546 crore at December-end 2013 from R2,902 crore in December last year. The bank also posted a loss of R1239 crore in Q3 against a profit of R42.2 crore in the same quarter a year ago. The ministry is monitoring on a daily basis the recovery of bad loans, deposit and credit operations as well as the share price of the bank. The government has already decided against options such as merging UBI with another bank.