BackChidambaram to discuss United Bank crisis with RBI governor
The govt is considering appointing Mukesh Kumar Jain as chairman and managing director
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New Delhi: Finance minister P. Chidambaram will meet Reserve bank of India (RBI) governor Raghuram Rajan on Friday to finalize the action plan to resolve the problems at state-owned United Bank of India.
“We know the path forward. It will be resolved on the 7th (of March)... We will strengthen the management of United Bank of India," Chidambaram said after his quarterly review meeting with state-run banks.
The post of the chairman and managing director of United Bank is lying vacant after Archana Bhargava resigned from the post last month at a time when the Kolkata-based lender is struggling under the weight of bad loans.
The government is considering appointing Mukesh Kumar Jain, an executive director in Punjab and Sind Bank, as chairman and managing director of United Bank, a finance ministry official familiar with the development said on condition of anonymity.
United Bank, which has been under the central bank’s scrutiny, had reported a loss of ₹ 1,238.08 crore for the quarter ended 31 December, compared with a net profit of ₹ 42.2 crore a year earlier because of rising bad loans.
The bank’s gross non-performing assets (NPAs) was at 10.82% as the end of December, the highest since Bank of Baroda reported a 11.42% number a decade ago..
The finance minister said that the bank is focusing on reducing the bank’s NPAs.
“United Bank of India has recovered ₹ 400 crore in cash and upgraded ₹ 800 crore worth of accounts in the last two months. Therefore, NPAs have been reduced by ₹ 1,200 crore," Chidambaram said.
The finance minister also dismissed the possibility of more banks facing similar problems. “We have the NPAs of every bank. I don’t think any other bank is in the same boat," he said.
But the finance minister admitted that NPAs in the banking system as a whole are likely to be higher in the current fiscal as compared to the last fiscal. Gross NPAs as of 31 March, 2013 was at 3.84% of all loans. RBI has estimated the gross NPAs to be around 4.4% at the end of the current fiscal year.
Chidambaram said that banks are focusing on recovery of loans. In the nine months ended 31 December, banks recovered ₹ 18,933 crore of loans and NPA accounts to the tune of ₹ 21,988 crore were redesignated as standard accounts.
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