Under fire over NPAs, United Bank of India chief Archana Bhargava quits citing ill health

Written by ENS Economic Bureau | Updated: Feb 26 2014, 17:34pm hrs
UBIArchana Bhargava has faced a stormy term at United Bank of India on issues including misreporting of NPA. Express
Archana Bhargava has quit as chairperson and managing director of United Bank of India with a year of her term still to run. The bank, battling record bad loans, had been earlier stopped from issuing any loans of above Rs 10 crore by the Reserve Bank of India.

She had sought voluntary retirement and her request has been accepted by the government, said Rajiv Takru, secretary, department of financial services. Executive directors, Deepak Narang and Sanjay Arya, will jointly run UBI, which became the first public sector bank in India to face a forensic audit. Non-performing assets of the bank has reached 162 per cent of its net worth by the end of December.

Following the announcement made to the stock exchanges, UBIs scrip hit a 52-week low of Rs 23.40 at the BSE. It recovered a bit later in the day to close at Rs 24.35, a gain of 0.41 per cent over the previous close. Sources said Bhargava, who took charge at UBI in April last year, had cited ill health for the reason behind her resignation.

She has reportedly been on leave since the bank announced its third quarter results on February 7. The bank posted a loss of Rs 1,238 crore for the third quarter ended December 2013 against a profit of Rs 42 crore a year ago. Bhargava has faced a stormy term at UBI on issues including misreporting of non-performing assets. Following up on the forensic audit by Deloitte, the finance ministry has ordered an administrative inquiry into the issue but has ruled out any need to merge it with another public sector bank.

The bank had, on Tuesday, sought to blame its software Finacle bought from Infosys for discrepancies in reporting of NPAs. But the software company has denied the charge. Finacle is one of the most used software by banks across the country. But immediately on taking joint charge at the bank, Narang clarified that there are no inherent deficiencies in the software.

UBIs gross NPAs rose 188.3 per cent to Rs 8,546 crore at the end of December, an addition of Rs 5,582 crore. It had Rs 2,963.8 crore of bad loans on March 31, 2013. The gross NPAs of the bank had risen to Rs 6,285.89 crore at the end of September from Rs 2,417.73 crore at the end of the second quarter of the previous financial year. The options for the bank at this stage are limited to get a loan from the government, which holds an 88 per cent stake in it to shore up its Tier-I capital. It will have difficulty approaching the markets as rating agency Icra has downgraded its upper and lower Tier-II bonds citing higher than expected deterioration in asset quality. The government had provided Rs 700 crore for capital infusion in FY14 this year but the bank has already eaten through it.

Government sources said the banks top management should have flagged the concerns earlier. Mihir Kumar is the government nominee on UBI board while Surekha Marandi is the RBI nominee. Bhaskar Sen was heading the bank before Bhargava.

Bhargavas exit has several precedents

Archana Bhargava is not the first person to leave a public sector bank before the end of term. The 1991 securities scam involving stock broker Harshad Mehta witnessed the exit of several high profile PSU bankers.

MN Goiporia, chairman of State Bank of India, had to leave the bank after the scam surfaced. National Housing Bank chairman MJ Pherwani, who once headed the undivided UTI, was also forced to quit in the same year.

Pherwani, considered as the mentor of Harshad Mehta, died under mysterious circumstances in less than a month after the scam surfaced. K Margabanthu, UCO Banks chairman, refused to quit, but he was asked to proceed on leave. He never returned from the leave. However, not all of them are related to frauds.

Bank of India chairman and MD, MG Bhide, resigned after differences of opinion in the board in 1998. Bhide, though remained active in the corporate sector and served on the boards of companies like Crisil, M&M Financial Services and Shipping Corporation of India.

SC Basu, CMD, Bank of Maharashtra was also asked to go on leave some years ago. Punjab & Sind Bank CMD NS Gujral too was moved out in 2003.