A little less than a year ago, Archana Bhargava, the then Chairman and Managing Director of the Kolkata-based United Bank of India (UBI), was chalking out her plans on overseas foray through branches in locations such as South Africa and the BRIC countries. A few weeks into her job then, she was also talking about her plans on boosting business and making fresh recruitments.

In a sharp reversal of fortunes, UBI was left rudderless on Friday as the Union Finance Ministry accepted Ms. Bhargava’s application for a voluntary retirement, effective February 20, saying that two executive directors would jointly run the bank till a new incumbent took over.

Caught in a vortex of sticky loans, UBI, which was in the black till the first quarter of 2013-14, reported a Rs.489.5-crore loss in the second quarter, which ballooned to Rs.1,238.1 crore by the December quarter.

At a time when the entire Indian banking system is stressed, UBI is no odd man out. But its losses are to be seen in the context of its size. The bank’s total income during the quarter was Rs.2,986 crore while its interest earning stood at Rs.2,765.5 crore. Listed in 2010, UBI has a paid-up capital of Rs.554.8 crore.

UBI, which is the lead bank in four eastern and north eastern states, is among the biggest lenders to the tea industry. It also has exposure in some big industries in the iron and steel sector.

Its problems are traced to its mounting bad loans much of which went unreported. Most of these non-performing assets were in the sub-Rs.10 lakh category but officials said that several big loans, which turned sticky, also contributed to the poor balance-sheet. The state of affairs came to light following a review by the banking regulator the Reserve Bank of India in mid-2013. The RBI, along with Deloitte, launched forensic audit of UBI’s books.

The results of those audits showed up in UBI’s third quarter results. Its capital adequacy ratio plummeted from 10.2 per cent a year ago to 9 per cent while its return on assets turned negative. Gross NPA increased to Rs.8,546 crore from Rs.2,902 crore a year ago.

Even as the top management went into a huddle last week saying that a drive would be launched to recover/upgrade the sticky loans, a dichotomy of opinion surfaced among the top brass on the reasons behind the current state of affairs. While a section blamed the “inherent deficiencies” of the Finacle software used by banks for NPA recognition, the IT major, Infosys, issued a media statement to refute it.

Haragopal M., Global Head, Infosys Finacle, said: “No bank has raised any issues regarding the performance of Finacle’s NPA module”. Infosys backed its statement by a quote from Deepak Narang, UBI Executive Director, who denied any inherent deficiencies in Finacle. “The version of the NPA tool currently used at UBI needed certain additional customisations to meet our feasible needs, which are being addressed now,” he said on Thursday.

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