United Bank of India may merge with Union Bank-DNA-23.02.2014-(Read my comments given below)
United Bank of India, stuck with bad debts of Rs 8,546 crore, is likely to be bailed out through a merger with Union Bank of India than through a government infusion of capital.
According to sources, the government will not want to re-capitalise United Bank, whose non-performing assets (NPAs) grew almost overnight during the tenure of chairman and managing director Archana Bhargava.
Arun Tiwari, CMD of Union Bank, denied the merger. "Government banks continue to stay and I absolutely deny this (merger with United Bank of India)," he told dna.
Union Bank has a pan-India presence and United is confined to east India. Union Bank has a 59% government holding versus United's 88%. Union Bank share currently trades at Rs 103 and United Bank of India's at Rs 24.
United incurred losses in the past two quarters after a profit of Rs 45 crore in the first quarter (April-June 2013).
The losses in the second and third quarter were Rs 489 crore and Rs 1,238 crore, respectively, forcing the Reserve Bank of India to issue a cap of Rs 10 crore on loans to a borrower account.
Bankers say political interference played a major role in the bank incurring such large NPAs, when there are built-in mechanisms to flag-off a potential NPA from the 91st day of non-payment of dues.
The government can divest its holding to the public, but with a dismal market cap of Rs 912 crore, such a move will not work out.
That leaves merger with a stronger bank the only option. Bankers say it is too early to comment and one would have to wait for at least two quarters to see the recovery measures initiated by the bank. Most bankers were surprised at the hasty exit of Bhargava.
"If the bank can improve profits, it will get back on track," said a chairman of a public sector undertaking (PSU) bank.
One strong reason for the merger talk is the sub-division of 26 PSU banks into seven groups, with smaller banks being the subset of larger ones, by the finance ministry last year.
"The move to form groups was nothing but a sinister move by government towards mergers. What is the point of forming a group to exchange vital information even on recovery?" said a senior member of the All India Bank Employees' Association.
Bank unions say the group was formed to prevent regional concentration. Union Bank has a pan-India presence, unlike United Bank of India that is mainly confined to eastern India.
The seven heads of the group and cluster of banks under each are: Union Bank of India with United Bank of India and Punjab & Sind; State Bank of India and its six associate banks; Punjab National Bank with Dena Bank and Vijaya Bank; Bank of Baroda with IDBI and Uco; Bank of India with Oriental Bank of Commerce and Andhra Bank; Canara Bank with Indian Overseas and Syndicate banks; Central Bank of India with Allahabad Bank and Bank of Maharashtra.
United Bank board meets to discuss turnaround strategy
Mithun Dasgupta -Financial Express -23.02.2014
Board members of the crisis-hit United Bank of India (UBI) on Saturday discussed ‘turnaround strategies’ for the bank, which lost its chairman
ard members of the crisis-hit United Bank of India (UBI) on Saturday discussed ‘turnaround strategies’ for the bank, which lost its chairman and managing director Archana Bhargava the previous day.
“We have discussed turnaround strategies for the bank in today’s meeting. We believe it is an achievable target for the bank to post a net profit in the March quarter,” UBI executive director Sanjay Arya told FE.
The bank had reported a net loss of more than R1,200 crore in the December quarter. The ratio of gross non-performing asset (NPA) to total advances during the Q3 of this fiscal jumped to 10.82%, with the amount of gross NPAs touching a whopping R8,545.50 crore. According to Arya, in the meeting, the strategies to contain fresh slippages, as well as recovering huge bad loans were prepared in order to improve the performance of the troubled bank by this fiscal-end.
“Our operating profit is decent. What had affected our net profit is huge NPA provisioning on the back of piling up of substantial NPAs. So, we have discussed ways to contain slippages and aggressive recovery. We have also decided to constantly chase all the defaulters,” he said. Significantly, it was the first board meeting of the bank after Bhargava quit.
Bhargava resigned as CMD even as the bank is facing a probe by the RBI and the government regarding the piling up of bad loans. Financial services secretary Rajiv Takru said Bhargava had put in her papers mentioning health conditions. However, reportedly, she had continuous faceoff with top officials regarding key operational issues, especially classification of asset quality in order to flag off NPAs.
My Opinion:
It is inhuman, illogical, brutal and absolutely injustice to
blame CMD of United Bank (who resigned) for rise in NPA to more than 10
percent. NPA or stress asset accumulation in the books of accounts of UBI is
not creation overnight. It has been allowed to accumulate for last so many
years willfully and strategically by clever team of officers, Executive
Directors and Chairman of the bank to win the praise and appreciation from
their mentors and ministers.
There is no doubt that CMD and EDs of UBI who worked for UBI
during last ten years did the same fraudulent act in the bank where they worked
before they were given the top post in UBI. The culture of bank is carried from
one bank to other by none other than ED and CMD of the bank who are appointed
by dirty persons of MOF.
I therefore feel that the Bank especially the bank which is
considered most high class performer is actually the worst class performer.
None can survive in government bank if he or she is not master in art of
manipulation and playing foul game with figures and realities. If an officer
tells the truth, he or she is thrown like Ashok Khema in Harayana and Durga Nagpal
in UP by their bosses..
It is bitter truth that position of NPA is worse in not only
in UBI but in all other public sector banks including State Bank of India. Only
the difference is that UBI CMD was innocent and simple hearted that she stood
boldly against evil doers of the past and forced auditors to declare NPA
strictly as per RBI norms. She did not apply motivating and manipulating
tactics to persuade auditors to hide NPA as his predecessor CMD and EDs used to
do and CMD and EDs of other banks are still indulged in. She did not like to
compromise with principles and hence she decided to step down from top post
instead of playing in the hands of her regulators and controllers.
If RBI or MOF is honest and bold enough, it should order
similar forensic audit at all other banks including SBI. I am very much
confident that more disastrous outcome will surface in other banks. NPA ratio
is more than 20 percent in most of banks if they are ideally stopped from
concealing bad assets on the plea of global recession or false reasons.
Restructuring of bad loans or ever greening of loans is rampant culture in
banks and very commonly used to hide bad debts.
Cheating and fraud with system is regular phenomenon in
public sector undertakings only because ministers and inspecting officials and
police officials are bigger thieves.
Munsi Premchand told rightly that if protectors become
destructers, none in India can save the system from disaster. And when entire
culture is corrupt crisis like what has surfaced in UBI and what is yet to be
surfaced in other banks has to happen sooner or the later. When majority of
politicians are lacking good culture and honesty, person like Arvind Kejriwal
and Ramdeo Baba have to suffer in India.
Last but not
the least, if RBI and MOF put pressure on Union Bank to accept amalgamation of
United Bank or advise United Bank to merge with Union Bank, the outcome will be
more dangerous and fatal. Union Bank will also start journey to hell in short
span of time.
It is
therefore desirable that
idea of merger is discarded and efforts be made to treat the case of UBI as a
classic example to teach lessons to other banks to improve or die. It is the
duty of RBI and MOF to punish all officers, auditors and politicians who
contributed directly or indirectly in accumulation of bad assets so that
message goes to all other banks and from now at least they stop unhealthy
practice in the larger interest of the bank, the staff, the customers and the
share holders.
Dear sir, had u known Ms bhargava u wud not have spoken such words. Why did she quit when such a disaster was going to be disclosed. I hv known her and worked directly under her. Ur arguements in her favour doesn't stand ground. She wud hv known all the things or many of the npa's would be due to her.
ReplyDeleteForensic audit wud disclose the facts but seldom big fishes are caught.
Dear Jain
ReplyDeleteI totally disagree with you in defending Smt Bhargava. She did what she was told to do while taking charge of United Bank. Severing the NPA norms only for banks without any responsibility on the part of the borrowers, pressurising banks to settle large borrowal accounts thereby indirectly forcing them to write off a considerable portion of the slipped loan accounts and finally depicting a picture that the bank like United Bank in this case, incurred huge loss and could not survive on its own - all are tacit move by the servants of IMF and WB at our union finance ministry for merger of banks which will be finaly taken over by foreign banks ultimately for their own survival.