 "Archana Bhargava")
The United Bank of India saga took a dramatic turn on Friday, with its chairperson Archana Bhargava deciding to step down, taking voluntary retirement citing health reasons - almost a year before she was to superannuate. The proposal was quickly accepted by the finance ministry, which relieved Bhargava immediately.
Bankers said this was the first instance of a chief executive of a public-sector bank taking voluntary retirement. But what surprised them the most was the speed at which the VRS request was accepted.
Bhargava, appointed the bank's chairperson in April 2013, had been given charge till February 2015.
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The Kolkata-based lender has been mired in controversy, with its financials deteriorating - its losses have mounted amid worsening asset quality, prompting the Reserve Bank of India (RBI) to put curbs on lending by the bank and ask for a forensic audit by an independent agency to dig deep into the systems and processes followed by it.
UBI reported a net loss of Rs 1,238 crore during the October-December 2013 period - compared to a Rs 42.2-crore profit in the same period the previous year - on the back of a 500 per cent increase in provisioning to Rs 1,783 crore. Bhargava had presided over the board meeting that finalised the bank's quarterly financial results.
"Archana Bhargava put in her papers yesterday. She applied for VRS (voluntary retirement scheme) and the government accepted it. There is an interim arrangement in place where the executive directors will look after the work. We hope to get a new person in her position in a couple of weeks," Financial Services Secretary Rajiv Takru told Business Standard.
The bank currently has two executive directors - Deepak Narang and Sanjay Arya. A search panel headed by the RBI Governor had identified M K Jain, executive director of Punjab & Sind Bank, for the position of UBI chairman & managing director after Bhargava's retirement. It is to be seen if the government decides to go ahead with Jain's appointment earlier than scheduled. Government officials said a new chairman for the bank would be appointed shortly.
UBI suffered fresh slippages of over Rs 3,000 crore which resulted in gross NPAs hitting 10.82 per cent, or Rs 8,546 crore. For the nine-month period, the bank has a net loss of close to Rs 1,700 crore. NPAs mainly originated from large industries (Rs 2,384 crore) and small & medium enterprises (Rs 2,436 crore).
The biggest challenge for UBI is capital, which has depleted due to higher provisioning. Its capital adequacy ratio fell to 9.01 per cent (according to Basel-III) at the end of December 2013. Its Tier-I capital adequacy ratio was at 5.59 per cent - well below the regulatory requirement of 6.5 per cent banks need to maintain from March 2014 under the Basel-III norms. The bank's board has approved raising Rs 1,000 crore Tier-I capital in coming months. Takru also said there was no proposal to merge UBI with any other bank.
"There is no point in transferring the burden of UBI to another bank," he said, emphasising that the bank had to work on its own to improve its health. The bank's board is going ahead with its meeting on Saturday, as was scheduled earlier. According to bank officials, the board will discuss the future course of action. The UBI stock slipped as much as 3.5 per cent on BSE after the announcement of Bhargava's resignation but later gained to end the day 0.4 per cent higher than its previous close, at Rs 24.35 apiece.
ALL IN A HURRY
- 23 Apr ’13: Archana Bhargava joins United Bank as CMD
- 14 May ’13: UBI says its Q4, FY13 net profit falls 79%
- 12 Aug ’13: UBI says its Q1, FY14 net profit drops 74%
- 9 Nov ’13: UBI reports net loss of Rs 489.5 cr in Q2, FY14
- 7 Feb ’14: UBI says its net loss expands to Rs 1,238 cr in Q3, FY14
- Feb ’14: Bhargava goes on leave after announcement of Q3, FY14 results
- 20 Feb ’14: Bhargava applies to the finance ministry for voluntary retirement
- 21 Feb ’14: The finance ministry says it has accepted Bhargava’s request
