United Bank of India face RBI's prompt corrective action dose
KOLKATA: Reserve Bank of India may put restriction on United Bank of India's branch expansion and direct it to make higher provisions to cover risks as continuous rise in sticky loans makes the lender a lever two offender for risk threshold breach under prompt corrective action (PCA) measures.
This would be the second time in four years that the state-run lender would come under regulatory sanctions and would be forced to take corrective measures. Earlier in 2013, RBI had restricted the bank from lending freely among other things after the then chairperson Archana Bhargava flagged off accounting malpractices.
The bank would also be barred from distributing profit among shareholders as a mandatory measure, despite reporting Rs 74 crore net profit for the fourth quarter as against Rs 413 crore loss in the year ago period.
Managing Director Pawan Kumar Bajaj was not available for comments as he flew to Delhi immediately after the board approved the financial parameters to attend a finance ministry meeting to discuss the bank’s turnaround plan.
The ministry asked 10 banks including IDBI Bank to submit a revival strategy for receiving capital infusion from the government this year.
In terms of the latest data, the bank’s non-performing assets rose to Rs 10952 crore at the end of March from Rs 9471 crore a year back. The gross NPA ratio deteriorated to 15.53% from 13.26% in the same period while net NPA ratio turned poorer at 10.02% from 9.04%.
RBI has identified four risk areas including high NPA, recurring losses and capital erosion and said that breach of any the risk threshold would result in invocation of PCA.
UBI breached the second category risk threshold with net NPA more than 9% and accordingly RBI may give direction to the bank management on credit risk and capital management.
The bank’s gross NPA ratio was as high as 15.53%.
The lender kept aside less provisions at Rs 43 crore compared with Rs 292 crore in the year-ago quarter helping it to show a net profit. Its gross profit was at Rs 116 crore quarter under review against Rs 121 crore loss in the corresponding period last year.
The bank's capital adequacy ratio under Basel III was strong at 11.14%.
This would be the second time in four years that the state-run lender would come under regulatory sanctions and would be forced to take corrective measures. Earlier in 2013, RBI had restricted the bank from lending freely among other things after the then chairperson Archana Bhargava flagged off accounting malpractices.
The bank would also be barred from distributing profit among shareholders as a mandatory measure, despite reporting Rs 74 crore net profit for the fourth quarter as against Rs 413 crore loss in the year ago period.
Managing Director Pawan Kumar Bajaj was not available for comments as he flew to Delhi immediately after the board approved the financial parameters to attend a finance ministry meeting to discuss the bank’s turnaround plan.
The ministry asked 10 banks including IDBI Bank to submit a revival strategy for receiving capital infusion from the government this year.
In terms of the latest data, the bank’s non-performing assets rose to Rs 10952 crore at the end of March from Rs 9471 crore a year back. The gross NPA ratio deteriorated to 15.53% from 13.26% in the same period while net NPA ratio turned poorer at 10.02% from 9.04%.
RBI has identified four risk areas including high NPA, recurring losses and capital erosion and said that breach of any the risk threshold would result in invocation of PCA.
UBI breached the second category risk threshold with net NPA more than 9% and accordingly RBI may give direction to the bank management on credit risk and capital management.
The bank’s gross NPA ratio was as high as 15.53%.
The lender kept aside less provisions at Rs 43 crore compared with Rs 292 crore in the year-ago quarter helping it to show a net profit. Its gross profit was at Rs 116 crore quarter under review against Rs 121 crore loss in the corresponding period last year.
The bank's capital adequacy ratio under Basel III was strong at 11.14%.