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UBI to sell sticky assets

Calcutta, Feb. 19: The United Bank of India (UBI) is planning to sell bad assets to asset reconstruction companies to lower its losses and improve its balance sheet.

Two senior bank officials told The Telegraph that the stressed public sector lender could sell some of its non performing assets as part of its efforts to get back into the black.

The bank is also planning to recover bad loans worth Rs 2,000 crore to lower its losses in the quarter ending March 31, 2014.

After suffering a net loss of Rs 1,238.08 crore in the December quarter, the regional heads of the bank met in Calcutta to prepare a plan to help improve performance in the final quarter ending March.

“The regional offices have been notified of the recovery drive which is critical for improving the health of the bank,” a senior official said.

“Besides recovery, there could be selling of stressed assets. The bank is making the necessary preparations for it,” he said.

Assets worth Rs 450-500 crore could be put up for sale.

Industry observers feel the sale of bad loans to asset reconstruction companies (ARCs) could help the bank to clear up its balance sheet.

Since these assets are fully provided for in the books, the proceeds from the sale of such assets go directly into the bank’s profit and loss account. However, ARCs purchase these assets at a discount to the offer price.

While Allahabad Bank has already sold off some bad loans, several other public sector banks are reportedly looking to sell off such assets to improve their balance sheets.

Blame on Finacle

The UBI has detected deficiencies in the software system sourced from Infosys that helps the bank to identify bad assets.

“The CBS (core banking solution) system is based on Finacle, which is used by many other banks. The Finacle system has inherent deficiencies.

“The deficiencies hamper correct identification of NPAs in borrowers under the Kisan Credit Card scheme, restructured accounts, over draft accounts and those covered by the Export Credit Guarantee Corporation scheme,” Ambarisha Nanda, general manager (planning and development) of the UBI, told the BSE.

He added there was no “intentional intervention at any level” to hide NPAs.

In response, Infosys said, “The solution has the proven ability and framework required to address the asset classification and NPA reporting under the IRAC (Income Recognition, Asset Classification) norms prescribed by the RBI.”

 
 
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