UBI, Infosys bury hatchet, work on new stressed asset software

Software major Infosys and the troubled public sector lender United Bank of India (UBoI) have settled their dispute over allegations of the former's faulty software. The tech giant is currently testing on a pilot basis an IT system to determine distressed assets at the bank's head office in Kolkata, which would soon be implemented across UBoI's branch network through out the country.

"We had issues with our software and had long discussions with our vendor Infosys. They sat in our head office for four months and corrected it and the software is now performing as per our satisfaction. In fact, Infosys is testing on a pilot basis the new software to determine stressed assets which will be implemented across all branches this quarter," United Bank's executive director Deepak Narang said.

The two companies got into a public spat in February over allegation of snags in Finacle, Infosys' popular software for banking sector, for excess recognition of loans as bad assets, a charge denied by Infosys, which claimed that the software system has a proven system to address asset classification under Reserve Bank of India norms.

Bad assets became a major issue for UBoI after its non performing assets jumped so much in the second and third quarters of FY14 that the bank had to post losses.

This forced Reserve Bank of India to put severe restrictions on its lending biz, while finance ministry initiated forensic audit.

Following a sustained NPA recovery process initiated by UboI, the bank was able to post a profit in the fourth quarter.

This would be sustained for the rest of the year, Narang told shareholders at the annual general meeting of the bank.

"Due to our recovery efforts we could turnaround in the fourth quarter. We plan to take it forward during the year. We are creating capacity building at the regional offices and branch level giving training to managers in monitoring management of loans and advances and how to do credit assessment. Daily reports to RBI are being given. We have created a special team to monitor all accounts under the charge of a general manager.

The cell is closely monitoring account by account at every branch. Again, each of the GMs have been assigned three regions, assessing and analysing performance of each of the regions. We are also holding meeting of branch managers twice a month across different parts of the country," the ED said while outlining the steps being taken revive the bank.

Despite getting an approval of RBI recently to restart lending to individual accounts of up to Rs 200 crore, UBoI has decided to turn into a retail bank by focusing on housing and other retail lendings.

"We will give much focus on housing loans and expand in this. This is a more secured loan because of the mortgages. We will also expand other retail advances. Our focus is also on accretion of CASA deposits. Our's is one of the highest in the industry and we want to build on that. Added to these would be continuous monitoring and recovery of NPAs," he said

The bank had taken large number of high cost bulk deposits at 9-10% rate to reach a targeted business level of Rs 2 lakh crore. It was about Rs 24,500 crore as on September.

"We have stopped giving quotes for bulk deposit after September and the level of bulk deposit has now come down to Rs 12,547 crore. We plan to repay our high cost deposits by September. This is the way we are undertaking rationalisation of costs."