RBI may supersede United Bank board if probe reveals wrongdoing

Feb 26 2014, 04:07 IST
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SummaryThe government and RBI are considering a host of options to salvage the troubled United Bank of India...

The government and RBI are considering a host of options to salvage the troubled United Bank of India, including the regulator superseding the bank’s board if an ongoing probe reveals wrongdoing at the board level, a senior official said. The RBI has already written to the finance ministry, suggesting possible ways to turn around the bank.

Financial services secretary Rajiv Takru told FE: “Superseding the board is an administrative alternative that the RBI has suggested. But we are waiting for the administrative inquiry report, which we should get soon.”

Under the Banking Laws (Amendment) Act, 2012, the banking regulator is empowered to supersede the board of directors of a banking company during exigencies and appoint an administrator till alternate arrangements are put in place.

“We are first trying to find out who all are responsible for the huge rise in NPAs at the bank and if there has been any illegality (in the affairs of the bank). If it is someone in the board (who is found guilty), the option of superceding the board can be looked into,” Takru added.

Following the recent episode of the bank’s chairperson and managing director Archana Bhargava putting in her papers and opting for voluntary retirement scheme, the finance ministry is now in the process of selecting her successor. In the interim, the CMD’s charge has been handed over to the two executive directors of the bank. The ministry is also monitoring on a daily basis the recovery of bad loans, deposit and credit operations of the bank.

As part of the efforts to turn around United Bank, several options are understood to be under consideration. This includes a merger with another bank and shifting its headquarters from Kolkata to the western or southern parts of the country, and a focus on lending in areas with a better repayment culture than the eastern and northeastern region where its business is now focussed on, ministry sources said.

However, the ministry sources say merging the bank with another one and shifting the base is not high on the agenda for the time being, terming these as ‘impractical’ in the present scenario. These options, they say, are ‘politically sensitive,’ and only to be employed as last resort in an election year.

UBI also denied the possibility of an immediate merger saying: “There is no information with us of the bank getting merged with any other PSU/private bank, including Union

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