UBI Blames Infosys In Asset Classification Faults

United Bank blames Infosys software for wrong NPA entries-Business Standard-19.02.14

Says the Finacle system has 'inherent deficiencies to correctly identify NPA in certain categories' of borrowers

Somasroy Chakraborty & Bibhu Ranjan Mishra  |  Kolkata/Bangalore  

February 19, 2014

Wrong NPA classifications is a result of the deficiencies in the software used by the bank and the challenge of checking each asset classification manually particularly in small accounts rather than any intentional intervention at any level to hide NPA... 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 to the bank very shortly," UBI said in a notice to the Bombay Stock Exchange (BSE).

In its response, Infosys said Finacle had the proven ability and framework required to address asset classification and NPA reporting as per the norms prescribed by RBI. A majority of banks in India, who run on Finacle were managing this quite well. “Additionally, from time to time we provide enhancements in the features for our customer banks to test and deploy in their environment to meet their business requirements. UBI through their application service provider HP have recently approached us with a request to implement this in their environment and we are helping the bank in this regard," Infosys said.

Infosys explained while the base software came only with basic application, banks depending on their requirements customised the application. The enhancements and customisation were only done when the bank makes a specific request.

Developed in 1999, Finacle is currently used by 183 banks across 84 countries. Infosys claims that the software serves 14% of the world's banked population. The company earns Beleaguered state-run lender United Bank of India (UBI) on Wednesday publicly blamed deficiencies in Infosys' Finacle software for failing to identify non-performing assets (NPAs) in its small loan accounts – a charge that was promptly dismissed by the software major.

While a recent audit conducted by the Reserve Bank of India (RBI) revealed that the bank followed a lax credit appraisal process that led to loans becoming non-performing, UBI clarified that there was no intentional intervention, at any level, to conceal bad loans. It also accused Infosys of not rectifying the Finacle software despite repeated requests.close to $300 million revenues annually from this product.

UBI's comments come at a time when the bank is battling a crisis of confidence with mounting losses, deteriorating asset quality and alleged dispute between senior management executives. In October-December, the bank's net loss more than doubled from a quarter earlier to Rs 1,238 crore as it had to made more provisions for non-performing assets.
 

Fresh slippages topped Rs 3,000 crore, expanding the lender's gross non-performing assets to Rs 8,546 crore. The gross bad loan ratio increased by 640 basis points to 10.82%, while net non-performing asset ratio deteriorated by 522 basis points to 7.44% at the end of December, 2013. The lender now probably has the worst asset quality in the banking sector.
 

The bank has now set an ambitious target of reducing its NPAs by at least Rs 2,000 crore in next couple of years.

http://www.business-standard.com/article/companies/united-bank-blames-infosys-software-for-wrong-npa-entries-114021900766_1.html

United Bank of India faces an uncertain future in a market-driven economy 

http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/united-bank-of-india-faces-an-uncertain-future-in-a-market-driven-economy/articleshow/30644795.cms

Some 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.

It 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?

Will RBI and MOF tighten administrative and legal machineries and to make them fully active and effective  to recover the loan from each and every bad borrower of each and every bank?