Bhargava: Stepping down
Feb. 21: United Bank of India chief Archana Bhargava has resigned citing health problems, amid probes into the bank’s rising bad loans.
“She applied for voluntary retirement on health grounds and her request has been accepted by the government,” financial services secretary Rajiv Takru said. The application for voluntary retirement has been accepted with effect from February 20, 2014, he said.
Executive directors Deepak Narang and Sanjay Arya will be jointly in charge of the Calcutta-based bank until the chairperson and managing director’s post is filled.
“Both the executive directors will remain in charge of the bank until a new incumbent joins,” the bank said.
Bhargava took charge on April 23 last year and her term was to end on February 28, 2015. She was one of the several women chiefs heading public sector banks. Before joining the bank,she served Punjab National Bank in various posts and later joined Canara Bank as its executive director in April 2011.
Bhargava was recently on leave for several days, leading to speculation of her resignation, sources said.
Top finance ministry officials said, “The ministry is concerned as the UBI was recently given a capital injection of Rs 700 crore. But rising bad assets, which seem to have accumulated over a period of time, have not been addressed.”
The UBI’s non-performing asset (NPA) level has risen to 10.8 per cent for the December quarter, the highest among scheduled banks.
An administrative inquiry is under way to find out why the bank’s non-performing assets had been under-reported.
Narang yesterday clarified that there were no “inherent deficiencies” in the software — Finacle developed by Infosys — that had initially been blamed for the faulty classification of UBI’s loans.
Officials said the ministry would also undertake its own review of what went wrong with the UBI. Meanwhile, Takru has ordered the bank to focus on retail loans rather than on large corporate loans that seem to be turning into sticky assets.
The officials also said the finance ministry has accepted the bank’s loan recovery-cum-recast plan and asked it to implement the programme.
Hard-pressed for funds, the UBI plans to raise an additional Rs 1,000 crore as capital.
According to officials, the government has no plans to merge the UBI with any other bank as of now as the bank is confident of turning the corner.
While Bhargava could not be reached for comments, senior officials of the bank told The Telegraph that she had a difference of opinion with bank officials on the classification of non-performing assets (NPAs) and the subsequent deterioriation of the bank’s financial health. This might have prompted Bhargava to quit before the end of her tenure.
“Some of the decisions taken by the chairman, particularly relating to identification of non performing assets were not acceptable to many senior officers of the bank,” said an official.
The chairperson had insisted that all loans identified as sticky assets by the software Finacle be recognised as NPAs by the bank without taking into consideration any possibility of recovery, he added.
Once declared as NPAs, the bank had to make provisions for these bad assets. Several senior officers expressed their dissent after the bank suffered a loss of Rs 489.47 crore for the quarter ended September and Rs 1,238.08 crore for the quarter ended December.
“The bank would now be clearly focussing on recovery. There would be two-pronged benefits from it. First, many accounts could be upgraded and the provisioning burden could lower. Also, risk-weighted assets could be lowered which would result in an improved capital adequacy ratio,” said the official.
“Banks are under strain owing to rising non-performing assets,” finance minister P. Chidambaram had said on Monday while presenting the interim budget before the Lok Sabha.
“Bankers have assured me that as the economy turns they will be able to contain the non performing assets and recover more loans.”
Bad loans or NPAs have risen to 4.2 per cent of total credit as of September 30 from 3.4 per cent last March, according to data available with the Reserve Bank of India.