Finacle not at fault for United Bank’s troubles: Infosys--LiveMint 20.02.2014
United Bank executive director says at least Rs.400 crore of standard assets were wrongly declared as NPAs
Kolkata/Bangalore: A day after United Bank of India dragged Infosys Ltd into a controversy by blaming its Finacle software for faulty recognition of sticky loans, the information technology (IT) firm responded by saying the Kolkata-based lender had only recently asked for an upgrade.
“We wish to firmly state that the solution (Finacle) has the proven ability and framework required to address asset classification and NPA (non-performing asset) reporting as per…norms prescribed by RBI (Reserve Bank of India),” Infosys said in a statement.
Launched in 1999, Finacle is used for accounting by about 90% of Indian banks. It is also used by some foreign banks, and generates for Infosys about $300 million in annual revenue, according to industry estimates.
United Bank’s wrong NPA classification was the “result of deficiencies in the software” used by it, the lender said in a statement to Mint on Tuesday. Finacle, according to United Bank, has “inherent deficiencies to correctly identify NPA in certain categories of borrowers”.
The bank on Wednesday released the statement to the stock exchanges in the form of a regulatory filing.
“Finacle has been in use at our bank for at least 10 years now,” said the chief information officer of a state-run lender, asking not to be identified. “Its NPA (recognition) capability was built over a period of time…and it has been built quite well.”
Recognition of NPA “through system (Finacle)” in the September and December quarters has resulted in “a large number of standard accounts (being) shown as NPA and NPA accounts (being) shown as performing assets”, United Bank had said in its statement.
The bank’s executive director Sanjay Arya said in an interview on Wednesday that at least Rs.400 crore of standard assets were wrongly declared as NPAs because of a software snafu. He, however, admitted to manual supervision of asset classification and that there could have been some inadequacies in the past in the scrutiny of sub-Rs.5 lakh loans.
“The weakness of the tools used by the bank previously and also (of those) used in the September and December quarters largely explain variation in NPA figures,” United Bank said in its Tuesday statement.
What it was referring to was a spurt in its NPAs—the lender’s bad loans shot up from Rs.4,001 crore to Rs.8,546 crore between July and December. This translates into 10.8% of gross NPA, measured against its total loan book, which is currently the highest among state-run lenders.
United Bank has been using Finacle from 2007. From January last year, it has been using version 7.0.25 and it told Infosys earlier this month that it wants to upgrade to the latest version, Arya said.
Infosys had released some upgrades over the 7.0.25 version before the latest was launched, but these were not seen by Indian banks as “significant improvements”, according to Arya.
For the past two years, United Bank has been persuading Infosys to provide meaningful upgrades to versions it used, but the software developer was unable to provide them, Arya said.
However, in the wake of recent developments, Infosys has agreed to make “necessary changes” to the version in use at United Bank by March, he added.
An Infosys spokesperson said in an emailed response that “requests for professional services including NPA modifications” that were to the company through United Bank’s application service provider were “appropriately addressed”.
Due to rapid deterioration in asset quality, United Bank was forced to halt lending. Special audits were conducted by the Reserve Bank of India and an arm of professional services firm Deloitte, following which the banking regulator asked it in November to stop making more than Rs.10 crore in loans to any single borrower.
With its capital adequacy ratio (CAR) crashing to 9.01% following its Rs.1,238 crore loss in the December quarter, the bank has been forced to halt lending almost entirely. Arya expects things to look up and the restrictions imposed on lending to be withdrawn by the end of the March quarter
Nothing wrong in finacle software prepared by Infosys. Ot os clever top officials in all banks who have misused the finacle to conceal bad debts . Unfortunately UBI is exposed, others are still hiding NPA . If all banks truely and honestly identify bad debts, at least 20% of total advances will be NPA
ReplyDeleteSome of UBI officers have said to defend bank management that some of the switches at their control room were put off inadvertently by someone and hence identification of bad debts could not be done by the system. It means thousands of branch officers and administrative officers do not see the accounts of borrowers either at branch level or at administrative level and hence they failed to point out the fault of the system.. It means officers working at branch never looked into accounts of borrowers and fully were dependent of software generated Bad debts. They plead that this is why they could not detect the fault of machine and especially the software supplied by Infosys.
ReplyDeleteIt appears completely bakwas and ridiculous to all those officers who are working in other banks and well versed with the process of identification of bad debts in compliance of RBI norms. And even if it is so , it also exhibits the hollowness and character of top executives of the bank who completely ignored to assess the working and were busy in serving their vested self interest and in buttering to ministers and top bosses.
Secondly some officers of UBI plead that software of Infosys was not perfect and hence identification of bad debt was incomplete. It means blame goes to Infosys Pvt Limited who supplied the software. But here too, it is important to mention that same company Infosys supplied the same software to many other banks.
It means either UBI has manipulated and tapered with the software as per their whims and fancies or other banks using the same Software supplied by the same company Infosys are also sitting on piles of Bad debts.
Whatsoever may be the reason behind lesser identification of NPA or behind the concealment of bad accounts , it may by the fault of persons handling the system or it may be the system itself, To me at least, there is no doubt in it there are thousands of crores worth NPA hidden in system of all public sector banks .
Obviously not only United Bank but all banks have also concealed bad debts to the tune of thousand and lac of crore rupees and intentionally made lesser provisions in past few years to book higher and higher profit to project attractive financials and finally cheated and played fraud with their customers, their investors and their share holders.
RBI officials, auditing inspectors and team of various firms of Chartered Accountants who have from time to time audited books of accounts of bank’s branches, all have colluded with each other to conceal bad debts and certify the books of account willfully ignoring the sickness and ill work of the officials.
Now million dollars questions are as follows
Will RBI now at least peep into health of all other banks and order forensic audit of all these banks to know the bitter truth of bad debts and expose the top officials of all these banks?
Will RBI show the courage and boldness to trap ED and CMDs of United Bank and other banks who have will willfully damaged banks to serve their self interest and to promote their own career?
Will RBI and MOF punish EDs and CMD retired or serving , who neglected in performance and spent their time only in buttering ministers and top officials of other banks and who spent time in delivering good speeches on their false performance?
Will RBI assess the character of all past EDs and CMDs of United Bank and officers of the bank from where they were sent to United Bank on Promotion?
Will RBI and MOF introspect how bad officers could get success in promotion to the level of ED and CMD of a bank despite having so many charges of corruption and despite in reducing the cases of delinquencies in loan accounts.
Will CVC of the country punish CVOs of public sector banks who played foul game with top officials of banks where they were posted during last decade and who willfully and with ill-motivation ignored the charges of corruption leveled against various officers of the bank?
Will RBI and MOF punish CAs who certified the good health of banks despite various signs of illness?