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Kolkata-headquartered United Bank of India has blamed its bad loans problem on inherent deficiencies in its core banking solution (CBS) platform, which is based on Infosys’ Finacle system.
In a statement to the BSE, the public sector bank said: “The Finacle system has inherent deficiencies to correctly identify non-performing assets (or bad loans) in certain categories of borrowers like Kisan Credit Card, Restructured Accounts, Cash Credit/Over Draft continuously overdrawn for more than 90 days, Export Credit Guarantee Corporation covered accounts, etc. The deficiencies still continue in the software.”
The bank said the generation of NPAs (non-performing assets) through the system during the September-December period has given rise to a large number of standard accounts being shown as NPAs and NPA accounts being shown as performing assets.
United Bank’s gross non-performing assets jumped 194 per cent to ₹8,545.50 crore (including fresh slippage of ₹3,172 crore in the October-December quarter) as of December-end 2013 against ₹2,902 crore in December-end 2012.
Rise in provisioning Huge provisioning of ₹1,783 crore towards bad loans saw the bank report a loss of ₹1,238 crore in the third quarter against a net profit of ₹42 crore in the year-ago period.
According to the bank, manual checking of asset classification done through system poses a challenge, particularly in case of small accounts (such as agricultural loans, Government-sponsored loans, small business loans, etc) in view of their magnitude.
“The bank has been pursuing with Infosys for a long time to rectify these deficiencies in the Finacle system and the solution to some of which will be made available very shortly,” the statement said.
Infosys’ stance An Infosys spokesperson said: “We wish to firmly state that the (Finacle) solution has the proven ability and framework required to address the asset classification and NPA reporting as per the Income Recognition and Asset Classification norms prescribed by the RBI.”
Infosys said from time to time, it provides enhancements in features for its customer-banks to test and deploy the same in their environment to meet their business requirements.
“United Bank of India, through its application service provider HP, recently approached us with a request to implement this in their environment and we are helping the bank in this regard,” the spokesperson said.
United Bank said its Executive Directors and top management are confident of upgrading and reducing NPAs by at least ₹2,000 crore in the March quarter.
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