RBI restricts United Bank’s lending powers
( My Views Given Below)
The action against United Bank followed a spurt in sticky assets at the lender and allegations of shady accounting practices and poor governance. After taking over as United Bank’s chairperson in April, Archana Bhargava flagged off accounting malpractices at the bank.
“The regulator issues directives from time to time to banks as part of its supervisory function to monitor the various functional areas…under risk-based supervision, and the present action is part of such measure,” United Bank said in a statement in reply to an emailed questionnaire.
RBI has been concerned about the increase in bad loans at banks as slower economic growth and high interest rates make it tough for borrowers to repay debts, and stalled project approvals crimp corporate cash flows. Gross non-performing assets (NPAs) at 40 listed Indian lenders rose close to 37% in the September quarter from a year earlier, to Rs.2.29 trillion fromRs.1.67 trillion. Restructured loans have also risen at a rapid clip.
“The absolute level of restructured assets and NPAs together is around 10% and that’s not a comfortable level,” RBI governor Raghuram Rajan said in an October interview to Mint.
In the case of United Bank, the limit on advances and moratorium on restructuring debt appear to be an interim arrangement until an RBI-mandated forensic audit of internal practices is concluded. Still, the move—unprecedented in recent years—has embarrassed the Kolkata-based public sector lender and hobbled its growth, its top officials said, asking not to be named.
Deepak Narang, an executive director from whom explanations were demanded by the ministry of finance, said he had no comment to make on this matter.
Alongside flagging the accounting malpractices, Bhargava went on overdrive to clean up United Bank’s books, and this led to 171% year-on-year increase in provisioning at Rs.1,493.43 crore and a Rs.444.74 crore net loss in the first half of the current fiscal year.
In the June quarter, the bank’s gross NPAs rose by Rs.1,037.92 crore toRs.4,001.74 crore, and from there on to Rs.6,285.89 by the end of September. In the first six months of the current year, United Bank’s gross NPAs rose byRs.3,322.07 crore to 7.52% of its assets, the highest among public sector banks, against 4.25% at the end of March.
An increase in provisioning towards sticky loans resulted in a Rs.489.47 crore net loss in the September quarter, which, in turn, led to a downgrading of United Bank’s bonds by rating company Crisil Ltd this month. Crisil said it reflects deteriorating asset quality and weakening credit risk profile of United Bank.
The increase in bad loans was accompanied by a sharp growth in lending, something RBI is not comfortable with. In the six months till September, the bank’s loan book expanded by Rs.13,928 crore to Rs.83,636 crore. The biggest jump came in the July-September quarter, during which United Bank registered a 34.16% year-on-year growth in lending—more than double the industry average.
Bad loans have been growing at an alarming pace, said an independent director of the bank, asking not to be named. The clampdown on lending is aimed at stemming the rot at a time when United Bank’s capital adequacy ratio is under pressure, this person said, adding: “The disease has been diagnosed, and the right medicine is now being applied.”
Previously, the credit approval committee headed by the bank’s chairperson had the authority to sanction up to Rs.250 crore in loans. The executive directors could clear loan applications of up to Rs.90 crore, and general managers up to Rs.35 crore.
United Bank could also give loans in excess of Rs.250 crore with the approval of its board, but until the embargo is lifted, even the full board cannot sanction loans in excess of Rs.10 crore, United Bank officials said.
United Bank’s stock closed at Rs.32.20 on BSE, down 2.42%, on a day the Bankex, the exchange’s banking index, dropped 2.25% and the benchmark equity index, the Sensex, fell 1%.
Formed by the merger of four local banks in 1950, some of which were founded in Bangladesh, United Bank had a history of being a weak bank until the late 1990s. At the time of nationalization in the late 1960s, it was among India’s top four lenders.
I would like to put forward few questions before officials of RBI and before Government of India specially Finance Minister who always speak good for the bank and who exploit banks for political gain and who are supposed to be watch dog for safety , security and health of bank and for protecting the interest of investors, customers and staff of the bank.
- Is Only United Bank of India a bank which has added huge volume of Non Performing Assets?
- What RBI has done to other banks like SBI or Uco or other banks which has accumulated NPA and impaired assets of more than 10%
- What actions have been taken against EDs and CMDs of United Bank who contributed in rise of Bad debts, who failed to monitor properly, who sanctioned without due diligence, who took bribe and costly golden an diamond gifts from Branch heads and accumulated wealth disproportionate to their total income from behind the scene ?
- What action has been taken against Ministers, directors and RBI officials who also contributed in piling up of bad debts and who totally ignored the health for their self interest?
- What action has been taken against politicians who gave verbal orders to bank officials to sanction loan to corporate and who are now silently watching the development?
- What action has been taken by RBI and Government of India to fix accountability on top official of bank who are either in service or retire or who have been elevated to the post f ED or CMD of other bank?
- What action have been taken against those ministers and officials who recommended such an officer for the post of ED and CMD (by taking bribe or gift or under intoxication of flattery and yesmanism ) who caused enormous loss to bank, bank customers, bank staff and bank shareholders?
- What action has been taken against defaulters who have huge wealth but who are not repaying bank's dues?
- What actions have been taken against CAs , Advocates and valuers gave ill-motivated bad reports to banks either after taking bribe or in nexus with bankers or under pressure of some local netas?
- Last but not the least ---What actions have been taken against court judges, DRT officials , certificate officers, revenue recovery officers etc who are willfully or under manpower constraints postponing and inordinately delaying decision on court cases lodged by banks?
Read following news also
RBI restricts United Bank’s lending powers
( My Views Given Below)RBI Will Conduct Special Audit Of Allahabad Bank
To check for potential NPAs, RBI orders audit of Allahabad Bank
Close on the heels of directing a forensic audit on United Bank of India, the RBI has initiated a special audit of another Kolkata-based lender, Allahabad Bank.
The banking regulator has notified Allahabad Bank about the audit to assess the potential non-performing assets and ‘special mention accounts’, finance ministry sources told FE. The RBI’s focus on ‘special mention accounts’ of banks is part of its efforts to ensure that the lenders upgrade their Early Warning Systems so that timely action can be taken before more accounts slip into the NPA category, the sources added.
They said one of the objectives of the forensic audit being carried out on United Bank of India is to find out whether any criminal intent on the part of the bank officials had led to a rise in bad loans, and to present such evidence in a court of law.http://importantbankingnews2.blogspot.in/2013/12/rbi-will-conduct-special-audit-of.html
Close on the heels of directing a forensic audit on United Bank of India, the RBI has initiated a special audit of another Kolkata-based lender, Allahabad Bank.
The banking regulator has notified Allahabad Bank about the audit to assess the potential non-performing assets and ‘special mention accounts’, finance ministry sources told FE. The RBI’s focus on ‘special mention accounts’ of banks is part of its efforts to ensure that the lenders upgrade their Early Warning Systems so that timely action can be taken before more accounts slip into the NPA category, the sources added.
They said one of the objectives of the forensic audit being carried out on United Bank of India is to find out whether any criminal intent on the part of the bank officials had led to a rise in bad loans, and to present such evidence in a court of law.http://importantbankingnews2.blogspot.in/2013/12/rbi-will-conduct-special-audit-of.html
To check for potential NPAs, RBI orders audit of Allahabad Bank
Close on the heels of directing a forensic audit on United Bank of India, the RBI has initiated a special audit of another Kolkata-based lender, Allahabad Bank.
The banking regulator has notified Allahabad Bank about the audit to assess the potential non-performing assets and ‘special mention accounts’, finance ministry sources told FE. The RBI’s focus on ‘special mention accounts’ of banks is part of its efforts to ensure that the lenders upgrade their Early Warning Systems so that timely action can be taken before more accounts slip into the NPA category, the sources added.
They said one of the objectives of the forensic audit being carried out on United Bank of India is to find out whether any criminal intent on the part of the bank officials had led to a rise in bad loans, and to present such evidence in a court of law.
The sources, however, added that the books of Allahabad Bank have not reached as precarious a stage as United Bank of India. The special audit at Allahabad Bank would be conducted by Ernst & Young, while Deloitte is carrying out the forensic audit on United Bank of India and is expected to submit its report by this month-end.
When contacted, Shubhalakshmi Panse, chairperson and managing director of Allahabad Bank, confirmed to FE that a thematic audit has been initiated by RBI and will be conducted by Ernst & Young. “I have been told they will look at the book of accounts and the credit portfolio,” she said.
Allahabad Bank’s net profit for the quarter ended September 30 rose to R276 crore from R234 crore in the same period last year. The bank’s gross NPA stood at 4.94% of gross advances in the July-September this year. In the corresponding quarter a year ago, the figure was 2.95%.
The introduction of a separate asset category of ‘special mention accounts’ and asking lenders to give their full attention to such accounts at the earliest stage to avoid bad loans is a practice followed by banking regulators in other countries — such as the US and Singapore — also.
However, the problem is that since the special mention accounts do not fall under the NPA category, they do not need provisioning and do not promptly come to the notice of RBI, the sources said, adding that the RBI now wants the banks to be equally careful about such accounts as well.
RBI governor Raghuram Rajan has made the resolution of distress assets a priority area as gross non-performing assets of 40 listed banks grew 37% year-on-year to R2.29 lakh crore at the end of September. Of the 40 lenders, 10 banks have gross bad loans above 5% of their total lending. Eight of these 10 banks are run by the government, including the State Bank of India, Punjab National Bank, UCO Bank and Central Bank of India.
Close on the heels of directing a forensic audit on United Bank of India, the RBI has initiated a special audit of another Kolkata-based lender, Allahabad Bank.
The banking regulator has notified Allahabad Bank about the audit to assess the potential non-performing assets and ‘special mention accounts’, finance ministry sources told FE. The RBI’s focus on ‘special mention accounts’ of banks is part of its efforts to ensure that the lenders upgrade their Early Warning Systems so that timely action can be taken before more accounts slip into the NPA category, the sources added.
They said one of the objectives of the forensic audit being carried out on United Bank of India is to find out whether any criminal intent on the part of the bank officials had led to a rise in bad loans, and to present such evidence in a court of law.
The sources, however, added that the books of Allahabad Bank have not reached as precarious a stage as United Bank of India. The special audit at Allahabad Bank would be conducted by Ernst & Young, while Deloitte is carrying out the forensic audit on United Bank of India and is expected to submit its report by this month-end.
When contacted, Shubhalakshmi Panse, chairperson and managing director of Allahabad Bank, confirmed to FE that a thematic audit has been initiated by RBI and will be conducted by Ernst & Young. “I have been told they will look at the book of accounts and the credit portfolio,” she said.
Allahabad Bank’s net profit for the quarter ended September 30 rose to R276 crore from R234 crore in the same period last year. The bank’s gross NPA stood at 4.94% of gross advances in the July-September this year. In the corresponding quarter a year ago, the figure was 2.95%.
The introduction of a separate asset category of ‘special mention accounts’ and asking lenders to give their full attention to such accounts at the earliest stage to avoid bad loans is a practice followed by banking regulators in other countries — such as the US and Singapore — also.
However, the problem is that since the special mention accounts do not fall under the NPA category, they do not need provisioning and do not promptly come to the notice of RBI, the sources said, adding that the RBI now wants the banks to be equally careful about such accounts as well.
RBI governor Raghuram Rajan has made the resolution of distress assets a priority area as gross non-performing assets of 40 listed banks grew 37% year-on-year to R2.29 lakh crore at the end of September. Of the 40 lenders, 10 banks have gross bad loans above 5% of their total lending. Eight of these 10 banks are run by the government, including the State Bank of India, Punjab National Bank, UCO Bank and Central Bank of India.
Raghuram Rajan-headed FSDC panel expresses concern over bad loans--Financial Express
The Sub Committee of the Financial Stability and Development Council (FSDC), headed by RBI Governor Raghuram Rajan, today expressed concern over the rising bad loans of banks.
The Reserve Bank will shortly bring out draft guidelines to address issues relating to asset quality, the central bank said after the 11th meeting of the FSDC Sub Committee.
"Other major issues taken up in the meeting included concerns relating to the deteriorating asset quality of banks," an RBI statement said.
The Sub Committee discussed the recent trends in the current account deficit and relative stability in the foreign exchange markets on account of measures initiated by the regulators and the government and also the improvement in the external environment, it added.
The FSDC was set up to strengthen and institutionalise the mechanism of financial stability and development.
Top 30 loan defaulters of public sector banks (PSBs) account for more than one-third of total gross non-performing assets of state-run lenders. The gross non-performing assets (GNPA) amount these accounts of public sector banks (PSBs) stood at Rs 72,174 crore, while for all banks it was Rs 91,667 crore at the end of September, 2013.
To improve the health of the financial sector and to improve asset quality of banks, besides preventing slippages, RBI from time to time issues instructions of banks.
The RBI statement further said the Sub Committee decided on a coordinated approach to the implementation of some non-legislative recommendations of the Financial Sector Legislative Reforms Council (FSLRC) within a defined timeframe.
Also, the desirability of developing a common repository of information on financial assets was discussed.
The RBI further said it was decided that the Inter Regulatory Technical Group, among other issues, would also explore implementation of such a repository in a progressive manner.http://www.financialexpress.com/news/raghuram-rajanheaded-fsdc-panel-expresses-concern-over-bad-loans/1206981
The Sub Committee of the Financial Stability and Development Council (FSDC), headed by RBI Governor Raghuram Rajan, today expressed concern over the rising bad loans of banks.
The Reserve Bank will shortly bring out draft guidelines to address issues relating to asset quality, the central bank said after the 11th meeting of the FSDC Sub Committee.
"Other major issues taken up in the meeting included concerns relating to the deteriorating asset quality of banks," an RBI statement said.
The Sub Committee discussed the recent trends in the current account deficit and relative stability in the foreign exchange markets on account of measures initiated by the regulators and the government and also the improvement in the external environment, it added.
The FSDC was set up to strengthen and institutionalise the mechanism of financial stability and development.
Top 30 loan defaulters of public sector banks (PSBs) account for more than one-third of total gross non-performing assets of state-run lenders. The gross non-performing assets (GNPA) amount these accounts of public sector banks (PSBs) stood at Rs 72,174 crore, while for all banks it was Rs 91,667 crore at the end of September, 2013.
To improve the health of the financial sector and to improve asset quality of banks, besides preventing slippages, RBI from time to time issues instructions of banks.
The RBI statement further said the Sub Committee decided on a coordinated approach to the implementation of some non-legislative recommendations of the Financial Sector Legislative Reforms Council (FSLRC) within a defined timeframe.
Also, the desirability of developing a common repository of information on financial assets was discussed.
The RBI further said it was decided that the Inter Regulatory Technical Group, among other issues, would also explore implementation of such a repository in a progressive manner.http://www.financialexpress.com/news/raghuram-rajanheaded-fsdc-panel-expresses-concern-over-bad-loans/1206981
Cobrapost sting: NABARD chief gives clean chit to co-operative banks
Amid allegations of co-operative banks being used as conduits for money laundering, NABARD, which jointly regulates such lenders, has said that it has found no shortcoming pointing towards any such activity.
"Every year we do an inspection and we have not found anything like that," National Bank for Agriculture and Rural Development's (NABARD) chairman Prakash Bakshi said over the weekend, when asked about the recent controversy over money laundering.
A probe launched by Reserve Bank of India following allegations of non-compliance with anti-money laundering measures and know your customer (KYC) norms by top private banks has reportedly found that cooperative banks are used as conduits.
Not having the entire bouquet of service offerings, the cooperative banks tie-up with scheduled commercial banks to expand their reach. Co-operative banks can accept cash under Rs 50,000 from customers (the limit at which reporting to tax authorities sets in). They usually earn commission from larger banks for providing services.
When asked about the misuse of the system and if this amounts to regulatory arbitrage, Bakshi said, "It is the same regulation for everybody. Banking Regulation Act is same for everybody."
Online portal Cobrapost had in March made public a sting operation purportedly showing some executives at three top private banks -- ICICI Bank, HDFC Bank and Axis Bank – allegedly agreeing to receive unverified sums of cash and put
them in their investment schemes and benami accounts in violation of anti-money laundering laws.
Earlier this month, it had followed up with a similar operation, showing executives at over 20 financial institutions, including State Bank of India and Life Insurance Corporation of India, offering similar services.
The Reserve Bank has maintained that no transaction has happened while the sting also does not point to "money laundering".
RBI Governor D Subbarao has also said: "RBI is not directly involved... even banks are not directly responsible. They are not expected to inquire about the source of income. It is for government and tax authorities to check money laundering."
Bakshi said Nabard, which disbursed a refinance of Rs 65,000 crore on short-term agri loans last fiscal, is targetting to take the same number up to Rs 80,000 crore in
the current fiscal.
Meanwhile, in a first, NABARD, in association with the National Payments Corporation of India, launched the maiden Kisan Credit Card (KCC) Debit Card for the customers of the Raigad District Cooperative Bank in the district headquarters
of Alibaug over the weekend.Under the scheme, the maximum loan amount for which a beneficiary farmer is eligible will be loaded on the card and he can withdraw the money as per his requirements. Interest applicable thereof, will have to be serviced.
Amid allegations of co-operative banks being used as conduits for money laundering, NABARD, which jointly regulates such lenders, has said that it has found no shortcoming pointing towards any such activity.
"Every year we do an inspection and we have not found anything like that," National Bank for Agriculture and Rural Development's (NABARD) chairman Prakash Bakshi said over the weekend, when asked about the recent controversy over money laundering.
A probe launched by Reserve Bank of India following allegations of non-compliance with anti-money laundering measures and know your customer (KYC) norms by top private banks has reportedly found that cooperative banks are used as conduits.
Not having the entire bouquet of service offerings, the cooperative banks tie-up with scheduled commercial banks to expand their reach. Co-operative banks can accept cash under Rs 50,000 from customers (the limit at which reporting to tax authorities sets in). They usually earn commission from larger banks for providing services.
When asked about the misuse of the system and if this amounts to regulatory arbitrage, Bakshi said, "It is the same regulation for everybody. Banking Regulation Act is same for everybody."
Online portal Cobrapost had in March made public a sting operation purportedly showing some executives at three top private banks -- ICICI Bank, HDFC Bank and Axis Bank – allegedly agreeing to receive unverified sums of cash and put
them in their investment schemes and benami accounts in violation of anti-money laundering laws.
Earlier this month, it had followed up with a similar operation, showing executives at over 20 financial institutions, including State Bank of India and Life Insurance Corporation of India, offering similar services.
The Reserve Bank has maintained that no transaction has happened while the sting also does not point to "money laundering".
RBI Governor D Subbarao has also said: "RBI is not directly involved... even banks are not directly responsible. They are not expected to inquire about the source of income. It is for government and tax authorities to check money laundering."
Bakshi said Nabard, which disbursed a refinance of Rs 65,000 crore on short-term agri loans last fiscal, is targetting to take the same number up to Rs 80,000 crore in
the current fiscal.
Meanwhile, in a first, NABARD, in association with the National Payments Corporation of India, launched the maiden Kisan Credit Card (KCC) Debit Card for the customers of the Raigad District Cooperative Bank in the district headquarters
of Alibaug over the weekend.Under the scheme, the maximum loan amount for which a beneficiary farmer is eligible will be loaded on the card and he can withdraw the money as per his requirements. Interest applicable thereof, will have to be serviced.
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