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The stock of state-owned UCO Bank is down 8 per cent today, after reports of a forensic audit ordered by the government into the bank’s non-performing loans.
This is the fourth public sector bank where a forensic audit has been ordered after Syndicate Bank recently got embroiled in a bribery scandal for extending credit to the highly leveraged Bhushan Steel.
Forensic audit is also being conducted into the accounts of Dena Bank and Oriental Bank of Commerce (OBC) on alleged misappropriation of funds from their fixed deposit customers.
In the recent June quarter, UCO Bank’s gross non performing assets (GNPA) stood at 4.3 per cent of loans down from 5.5 per cent during the same period last year. In fact, the bank’s GNPAs have been moderating since June last year. After sharp slippages (addition to bad loans) of about Rs 1,700 crore in the March quarter, the bank reported a substantial fall in the amount of slippages in the June quarter (about Rs 591 crore).
During 2013-14, UCO Bank assigned 133 NPA accounts worth Rs 1,869 crore to asset reconstruction companies. The bank also has a high restructured book at 8.66 per cent of loans as of June 2014. Hence, the total stressed loans for the bank works out to about 13 per cent of its loans.
On an average, about 11 per cent of total loans for PSU banks come under the stressed category. While other banks - Punjab National Bank (15 per cent), Andhra Bank (15.5 per cent), Central Bank of India (20 per cent) — have a higher proportion of stressed assets, UCO Bank’s asset quality is nonetheless a concern. The bank has low capital adequacy — Tier I at 8.49 per cent — just above the Government’s comfort level of 8 per cent. In fact, the bank’s capital adequacy was much below the 8 per cent in the December 2013 quarter.
PSU banks’ bad loans have been on a steep rise over the last two years. While the prolonged economic slowdown has played a role in this, weak loan appraisal and risk management systems at state-owned banks have also contributed, as recent events indicate.
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