Union Bank under-reported NPAs, made less provisioning

Reserve Bank of India (RBI) has pulled up Union Bank of India for under-reporting its gross non-performing assets and also in the provisions for these bad loans for the financial year 2017-18.

There is also a divergence in the net NPA figures of the bank.

The divergence identified by RBI resulted in the bank's losses widening to Rs 6,770 crore for the financial year 2017-18, higher than the loss of Rs 5,247 crore the bank had announced. The risk-based annual inspection of RBI identified Rs 50,237 crore of gross NPAs for the bank in 2017-18 while the bank had reported gross NPAs of Rs 49,370 crore for that financial year, resulting in a divergence of Rs 867 crore. RBI also found that the bank had provisioned (put aside capital for the bad loans) lesser than the regulatory prescription leading to a divergence in the provisioning of Rs 2,287 crore. The bank had also reported a net NPA figure of Rs 24,236 crore, but RBI put the figure at Rs 22,912 crore with gross NPAs going up. In fact, the bank had to report the divergence as the provisions were under-reported by over 10% of the operating profit of the bank.

Rajkiran Rai, managing director and chief executive officer, Union Bank of India, told analysts in a concall on Tuesday, "The divergence in provisions had to do with pre-dating of some of our NPAs. The regulator deferred on the date from which we had declared the NPAs. The pushback of the classification date resulted in the gross NPAs to climb and provision also to increase. With the gross NPA going up, the net NPA came down by Rs 1,414 crore. All this resulted in our provisions going up by Rs 3,300 crore."

"But this year we have kept an aggressive target of Rs 9,000 crore on recoveries, this includes repayments from two large accounts," he said.

On the divergence in asset classification and provisioning for NPAs for 2017-18, Indian Bank has showed a gap of Rs 178.50 crore in gross NPAs, Rs 41.40 crore in divergence in net NPAs while the divergence in provisioning stood at Rs 1,120.90 crore.

For 2018-19, the bank has narrowed the losses to Rs 2,948 crore, by stepping up recoveries, which amounted to about Rs 699 crore, a sharp increase from the same time last year when the bank had recovered only Rs 276 crore. The gross NPA at Rs 48,729 crore at the end of March 2019, marginally lower than the preceding quarter when it was Rs 49,713 crore. Fresh additions in the fourth quarter were Rs 3,275 crore. During the year the bank also wrote off its bad loans to clean up the balance-sheet. The total write-offs during the year were Rs 7,771 crore, a sharp increase from the Rs 2,847 crore write-off last year. Loans to infrastructure companies dominated its gross NPA with Rs 11,943 crore loans under stress, followed by the power sector where the NPAs are Rs 6,571 crore and iron and steel where the NPAs are Rs 5,065 crore.

THE MISMATCH

• Rs 6,770 cr – Union Bank loss for 2017-18 widened after RBI inspection
   
• Rs 5,247 cr – Loss the bank had announced for 2017-18
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• Rs 50,237 cr – Gross NPAs identified by RBI
   
• Rs 49,370 cr – Gross NPAs reported by the bank
   
• Rs 2,287 cr – Divergence in bad loans provisioning