Public sector lender United Bank of India, which had temporarily suspended lending following a pile-up of bad loans in the December quarter, blamed Infosys’ core-banking software Finacle for discrepancies in reporting NPAs.
In a filing to the stock exchanges on Wednesday, UBI said core banking solution of the bank is based on Finacle. “The Finacle system has inherent deficiencies to correctly identify NPA in certain categories of borrowers such as KCC, restructured accounts, CC/OD continuously overdrawn for more than 90 days and ECGC covered accounts. The deficiencies still continue in the software,” added United Bank.
Infosys, in an emailed statement told FE, “We wish to firmly state that the solution has the proven ability and framework required to address asset classification and NPA reporting as per the IRAC norms prescribed by RBI. United Bank, through their application service provider HP, have recently approached us with a request to implement this in their environment and we are helping the bank in this regard.”
The bank’s stressed assets were reportedly not detected for the last two to three years, which suddenly ballooned in Q2 and Q3 FY14. UBI’s NPAs at the end of the FY14 December quarter were R8,545.5 crore, up 194% when compared to R2,901.7 crore in the same quarter last fiscal.
“We, therefore, clarify that wrong NPA classifications are a result of the deficiencies in the software used by the bank and the challenge of checking each asset classification manually particularly in small accounts rather than any intentional intervention at any level to hide NPA,” the bank said in the filing.
The bank said it has been pursuing lnfosys for a long time to rectify the deficiencies in the Finacle system and the solution to some of which will be made available to the bank very shortly.
United Bank explained that the generation of NPA through system in September and December has given rise to a large number of standard accounts shown as NPA and NPA accounts shown as performing assets.
“With the implementation of the solution and with the various measures undertaken by the bank, the NPA position and the CRAR will improve substantially in March quarter.”
The lender is confident of upgrading and reducing NPAs by at least R2,000 crore to substantially improve the operating results in the Q4 FY14 quarter.