Friday, February 14, 2014

Bad Assets Were Concealed In United Bank --Says RBI Auditors

It is now detected and well established by Auditors that top officials of the bank used to switch off the button which automatically detect bad debts. Since long, apprehension from many corners have been expressed candidly that bank officials use to hide bad debts to book higher profit by making lesser provisions.But unfortunately RBI and Ministry of Finance willfully remained silent spectators of all such evil acts so that people cannot point out accusing finger towards them and they continue to use the public applaud for shining banks.

Auditors said that it is not clear who are behind this menace and this dirty act. Auditors are again managed to write the story of doubt which portrays a soft picture about continuing fraud so that top officials who are mastermind behind tapering of the system are exonerated by giving benefit of doubt.

Here the question is who used to control the technology and the system?

Who are the officers entrusted to monitor the functioning of the system?

 Were officers not tallying and matching the system generate bad debts from manually detected bad debts?

Whether branch Officials who are in direct tough with bad accounts did not point out the system fault? 

Or top officials themselves managed the ill-motivated task at their end i.e. at central office ?

Each bank and each branch of the bank used to run and were supposed to run  parallel manual exercise for detecting and identifying bad debts to synchronize the mechanized system of detection of bad debts until machine starts giving correct result. 

Why banks failed to do such exercise and who are responsible for such gross negligence?

How the switch remained off for years and prudent officers could not sense it in time? It gives stinking smell of  the dirty intention behind such foul game.

It is definitely not controlled by any junior or middle management officer. Without concurrence and guidance of top officials, junior or senior officers do not have courage to play with the well protected system.

Second question is whether the top officials are so much ignorant about the health of high value loan accounts and whether it is not their duty to verify the correctness of the volume of bad debts. A true banker knows very well the prominent loan accounts which are sick in quality or on the verge of going sick.

Rather it may be said without doubt that it is a well planned way of concealing bad debts and this dirty game has been persisting in almost all public sector banks since long. It is not a story of two or three years as claimed by clever and managed auditors, it used to be there even when machine or core banking solutions were not in place.

When CBS system technology was not in vague and manual working was done in bank to identify bad debts, top officials of banks used to say openly in meeting that none of branch head can declare any account as NPA until they are permitted by top officials on phone. Not only this , if any courageous officer dared defy the verbal guidelines of their bosses and used stick to RBI norms in identification of bad assets , they had to bear the brunt of top management . And without fail such sincere officers were rejected in promotion process and got the most critical remote transfer orders.

Further it is not only a singular case of making less provision to inflate profit of the bank, RBI is well aware how top officials of the banks used to make lesser provision or make no provision for pension and other terminal benefits to inflate profits. 

When this fraud was detected, RBI officials or officials of Ministry of Finance who were from behind the scene working in collusion with top officials of the bank and who used to misguide in banker meeting and who were protecting dirty game of bad bankers, allowed banks to make provision for residual terminal benefits and pension and amortized the same in five years so that huge burden may not adversely y affect the balance sheet of a bank and tarnish the image of the bank. If bad news spreads in the market, the share value could fall sharply and the wealth of many stalwarts could vanish who had invested huge money in shares of the bank.

Obviously there is no doubt that the fraud which has been detected by auditors in United Bank of India was committed by top officials of the bank and it is the duty of regulating agencies and CBI to call for explanation from Head of the bank and that from General Managers and Executive Directors who were mastermind behind the dirty tricks. Further they should try to peep into the balance sheets of other public sector banks so that the greatest scam of the country could come on the floor and people of India may understand the risk ahead.

All guilty, persons, whosoever it may be, heavy weight or low weight officer, must be punished in the larger interest of the customers investors as also staff working in the bank. This will open the eyes of Finance Ministers and politicians who has damaged the fundamentals of the bank by adopting vote bank policies and by pressurizing top bankers verbally to go for all such acts which adversely affects the profitability of the bank.

Especially PC should be made to understand that if bank staffs are not well paid and if bank staffs are not awarded for honesty and sincerity, health of banks has to be bad.

If flattery is the only quality for promotion and respect, volume of fraud and bad debts in government bank will continue to rise and endanger the deposit of innocent common men who keep their hard earned money in government banks only considering them safer than private banks.  



Is bad loan menace at United Bank of India a cover-up after serious lapses? -Economic times-14.02.2014

Is the bad loan menance at United Bank of India  a cover-up by the bank's management after serious lapses? Sources close to the development say, the report prepared by RBI-appointed forensic audit firm Deloitte suggests serious lapses on the credit appraisal and automated NPA detection system of the bank. 

Sources also say that the report suggests that NPAs were not being detected for past two and half to three years. A senior banker in the know says, "the automated system that detects NPAs was found switched off, whether it was intentional or by mistake remains a big question." The Reserve Bank of India had appointed Deloitte to conduct a forensic audit on the bank. 

United Bank of India sent shock waves across the banking sector when it reported gross NPAs at 10.89% in Q3, increasing its bad loans by nearly three times. However, sources in both the government and RBI maintain that the situation at United Bank of India does not pose a systemic risk. The bank has also been instructed to focus primarily on debt recovery and avoid any fresh loans especially on the corporate side. 

Though the bank is dire need of capital, sources indicate that the government will not be in a position to infuse funds immediately, and this will most likely have to wait till the new fiscal starts. 

UBI posted a net loss of 1238 crore rupees in Q3 compared with 42 cr net profit a year ago. Serious questions have also been raised on the bank's capital position. The bank's tier 1 capital has fallen to 5.6% as of Dec, 2013, which is below the minimum capital ratio stipulated by the RBI 

Even in the past questions have been raised on the governance practices at public sector banks. Sources indicate that the RBI had requested the government to appoint a committee on the same, following which P J Nayak committee to review the governance of bank boards in India was set up in January this year. 

No comments:

Post a Comment