RBI puts United Bank of India on corrective action plan

Economic Times

By Atmadip Ray, ET Bureau  Dec 20, 2017

 Reserve Bank of India has directed United Bank of India to raise capital, diversify credit portfolio and take cost control measures as the state-run lender is under severe stress with high sticky loans.

The central bank has also told the lender to retain whatever profit it earns without distributing it among shareholders.

"The action points focus on profit retention, capital augmentation, provision coverage, diversification of credit portfolio, rationalisation of expansion and cost control," UBI said Wednesday in its disclosure to stock exchanges.

RBI told the bank to follow these steps Tuesday under its Prompt Corrective Action (PCA) initiative as the bank was suffering from high net non-performing assets, low leverage ratio and requirement to raise capital, based on the assessment of the bank's position as on March 31.

The bank had net non-performing assets ratio at 10% as on March, breaching the prescribed second level risk limit of 9%, which was the reason for inviting RBI direction.

ET had in its report on May 19 highlighted the possibility of RBI action on the bank.

This is the second time in four years that UBI came under regulatory sanctions and be forced to take corrective measures for strains in financials. In 2013, RBI had restricted the bank from lending freely after the then chairperson Archana Bhargava flagged off accounting malpractices.

UBI's asset quality deteriorated further with gross NPA at Rs 12893 crore at the end of September out of total advances of Rs 68562 crore. The gross NPA ratio slipped to 18.8% making it one of weakest banks in terms of asset quality.

The Kolkata-based bank also suffered two consecutive quarterly losses this fiscal. It reported Rs 212 crore loss in the June quarter and Rs 345 crore loss in the September quarter.

The bank said the RBI action will not hamper other banking activities such as acceptance of deposit, credit disbursement and treasury function.

UBI's share price closed at Rs 17.35 on BSE Wednesday, 38% lower than its 52-week high of Rs 28.05.

"The regulatory action is not likely to have any material impact on the bank's performance and will contribute to the improvement of the internal control and intrinsic strength of the bank," UBI said in its filing to bourses.

Reference-https://m.economictimes.com/industry/banking/finance/banking/rbi-puts-united-bank-of-india-on-corrective-action-plan/articleshow/62181361.cms?utm_expid=.ebqSTgj1R76-y1FCuA4Mvw.0&utm_referrer=