United Bank blames Infosys software for wrong NPA entries

Blaming wrong classification for showing assets as bad debt, state-owned United Bank of India (UBI) today said the software system sourced from Infosys has "inherent deficiencies" in identifying quality of assets in certain categories.

The core banking solution (CBS) system of the bank is based on Finacle used by many other banks, UBI said in a filing to the BSE.

The Finacle system, it said, has "inherent deficiencies to correctly identify NPA in certain categories" of borrowers like KCC, restructured account, overdarft account continuously overdrawn for more than 90 days, ECGC covered account, etc, it said, adding, the deficiencies still continues in the software.

"The generation of NPA through system in September and December 2013 has given rise to a large number of standard accounts shown as NPA and NPA account shown as performing assets," it said.

Immediate comment from Infosys on the issue was not available. The bank further said that the weakness of the tools used by the bank previously and also in the tool used in September and December 2013 largely explain variation in NPA figures.

"We, therefore, clarify that wrong NPA classifications is 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," it said.

Kolkata-based UBI's gross NPAs rose 188.3 per cent to Rs 8,546 crore, an addition of Rs 5,582 crore. It had Rs 2,963.8 crore of bad loans on March 31, 2013.

The gross NPA of the bank had risen to Rs 6,285.89 crore at the end of September 2013 from Rs 2,417.73 at the end of second quarter of previous fiscal, an increase of Rs 3,868 crore.

Following sharp rise in NPA, the RBI had ordered forensic audit to be done by an audit firm. The firm has submitted the report to the central bank.

The bank further said it has been "pursuing with Infosys for a long time to rectify these deficiencies in the Finacle system and the solution to some of which will be made available to the bank very shortly."

With the implementation of the solution and with the various measures undertaken by the bank, the NPA position and the GRAR will improve substantially in March 2014 quarter, it added.