United Bank of India chief quits as bad-loan crisis boils over

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A file photo of Archana Bhargava.
A file photo of Archana Bhargava.

Due to retire in February next year, opts for VRS

Archana Bhargava, CMD of United Bank of India (UBI), has resigned. According to a release, 59-year-old Bhargava, who was at the helm of affairs at UBI since April 2013, opted for voluntary retirement with effect from February 20. She was due to retire in February 2015.

Bhargava’s resignation comes in the wake of a surge in bad loans at UBI, leading to a loss of around ₹1,200 crore in the third quarter.

UBI’s gross non-performing assets (NPAs) jumped to ₹8,546 crore in the October-December quarter (including a fresh slippage of ₹3,172 crore). Gross NPAs in the corresponding year-ago quarter stood at ₹2,902 crore.

UBI’s loan assets have been under the scanner since the start of this fiscal year. Having taken charge, Bhargava asked the Reserve Bank of India to re-audit its books, especially with regard to the smaller loans in the below-₹10 lakh category.

Turning bad

Most of these loans were said to be turning bad. Acting upon the request, the RBI, along with Deloitte, began special audits. Though the findings have not been made public, the focus on bad-loan detection was evident in the rise in NPAs.

Despite reporting a profit in the April-June quarter, UBI saw a 35 per cent jump in sticky assets to around ₹4,000 crore, from ₹2,954 crore during the year ended 2012-13. The surge in bad loans dragged the bank into the red, beginning from the July-September 2013 quarter.

As of December 31, 2013, UBI’s gross NPAs stood at 10.82 per cent of total advances, one of the highest among Indian banks.

D Narang, Executive Director, UBI, said the bank has initiated a recovery drive. Opportunities are also being explored to sell the bad loans to asset reconstruction companies. “Our idea is to bring down NPAs by at least ₹2,000 crore in this quarter,” he said.

Asked if the bank had undertaken any such recovery drive over the last year, Narang refused to comment.

New chief soon

The Finance Ministry is likely to appoint a new chief for United Bank in the next 15 days, said Rajiv Takru, Secretary, Department of Financial Services.

(This article was published on February 21, 2014)
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