RBI says United Bank problem one of governance, not ownership

Tags: News
Stating that issues at United Bank of India (UBI), which is struggling with a high level of asset stress, are due to poor corporate governance practices, the Reserve Bank today said it has ordered a forensic audit to improve the working of all public sector banks.

"All issues point towards corporate governance. We have written to the government to take a set of steps to improve corporate governance and it is not only for UBI but the entire banking system as a whole," outgoing deputy governor K C Chakrabarty told reporters.

The government owns 26 banks, which account for over three-fourths of the banking industry and most of them are facing an unprecedented rise in bad loans.

Bad loans and restructured loans as of the December quarter accounted for over 10 per cent of the system. Banks, mostly PSBs, recast close to Rs 1 trillion of bad loans in the previous financial year, taking the total corporate debt restructuring book to over Rs 38 trillion so far.

Most of the state-run banks have higher stress on asset quality than their private sector competitors. Chakrabarty, however, added that ownership does not affect or limit the performance of a bank.

"We have not said so and we don't believe that ownership affects the performance of a bank," he said.

The case of UBI, which witnessed unprecedented events such as the resignation of its chairperson and managing director Archana Bhargava after the NPAs ballooned to over 10 per cent, is "neither a shock nor surprise to RBI," said Chakrabarty, who is serving his notice period.

Chakrabarty said the RBI commissioned a forensic audit of the bank's books after Bhargava's letter saying there might be some unrecognised non-performing assets.

Without giving any details, he added those fears have been found to be true in the forensic audit.

"We are not unnecessarily perturbed for one particular bank, UBI, it is because of certain initiatives by the bank management that we had to intervene," he said.

Post new comment

E-mail ID will not be published
CAPTCHA
This question is for testing whether you are a human visitor and to prevent automated spam submissions.
Image CAPTCHA
Copy the characters (respecting upper/lower case) from the image.

EDITORIAL OF THE DAY

  • Govt can’t clamp down on voices that ask uneasy questions

    It has hardly been a peaceful annum for Greenpeace’s India arm that has been in and out of trouble over the last one year.

FC NEWSLETTER

Stay informed on our latest news!

INTERVIEWS

Sarthak Raychaudhuri

vice-president, HR, Asia South Whirlpool of India

GV Nageswara Rao

MD & CEO, IDBI Federal Life

Timothy Moe

Goldman Sachs

TODAY'S COLUMNS

Varun Dutt

<b>Risk Factor:</b> The blame game

In decision-making, the fundamental attribution error (FAE), also known as ...

Zehra Naqvi

Dignity of labour is dignity of life

M Rafi Khan, a retired police IG, used to ...

Gautam Gupta

Retailers have it tough, thanks to e-commerce

For the past few months our focus has been on ...

INTERVIEWS

William D. Green

Chairman & CEO, Accenture