In late 2013, 10 general managers of the Kolkata-based bank had complained to both to RBI and the finance ministry that Bhargava had okayed the loan by overriding the board's dissent. The Reserve Bank of India has placed curbs on the bank giving loans of more than Rs10 crore to a single account due to its mountain of bad debt. "We are under a lot of stress. We cannot comment on this," said executive director Deepak Narang.
RBI and government officials confirmed that the complaint had been routed through independent director Sunil Goyal, who declined to comment. Bhargava resigned on February 22 citing health reasons. Agovernment official aware of developments said both the government and RBI were agreed on the course of action regarding Bhargava.
"Financial services secretary Rajiv Takru and RBI governor Raghuram Rajan were on the same page on the issue... A staterun financial institution cannot be in a mess for long. And UBI's downfall was way too fast," said the official, reflecting on the bad loans of the bank which surged threefold to Rs8,546 crore at the end of December from Rs2,964 crore in March. Gross non-performing assets (NPAs) touched 10.82% of total loans at the end of December.
Bhargava has chosen to stay silent and not defend herself throughout the controversy amid conflicting reports about what exactly her role was. Some have depicted her as being over eager to clean up the bank's bad loans and riding roughshod over those who disagreed with her.
At one point the bank also blamed the spike in non-performing loans on the software it was using, although it seemed to step back from doing so in later statements.
According to some officials, the finance ministry and the RBI weren't convinced about Bhargava's efforts to cleanse the system. "Earlier, it was felt that she was setting the books right as most chairmen of state-run banks do when they take over. But then, complaints against her of both financial and personal mismanagement started flowing in," said a senior government official.
The forensic audit by RBI in November raised two issues, said a central bank official. "It was mentioned that some of the accounts were restructured without a viability study and some accounts, which were not eligible for special dispensation, were not downgraded," he said. The government is yet to appoint a new chairman but both RBI and finance ministry officials accept that it will be a tough task for the next incumbent.
"We cannot supersede the bank's board, after all it's a staterun bank. The government will have to infuse capital and put pressure on recovery," said the RBI official cited above. "An administrative inquiry is under way as to why these NPAs were under-reported or disguised.
NPAs have to be addressed. If there is a lapse then responsibility will be fixed," financial services secretary Rajiv Takru said.
Source: Economic Times