United Western Bank, which was under the regulatory scanner for the last two years, was pulled up by the Reserve Bank of India in the inspection reports for severe irregularities, weaknesses in the system and other deficiencies in internal controls.

The RBI had even asked directors not to interfere in the functioning of the bank and asked it to not open new branches till non-performing assets are reduced to the peer average level.

In its inspection report for 2005, the RBI noted deficiencies in the asset-liability management. As on March 31, 2006, maturing liabilities are more than assets by Rs 31.88 crore for short-term loans and by Rs 1,325.95 crore from long-term loans. This means, in case the bank is not able to find new deposits or is unable to roll over existing deposits, liquidity position of the bank may be severely affected.

The central bank pointed out deficiencies in complying with guidelines issued by RBI on income recognition, asset classification and provisioning of UWB, which had gross NPAs of Rs 490 crore. “The bank shall take steps to upgrade credit appraisal skills and systems. The bank should prepare sector-wise recovery targets with special emphasis on SSI & medium & large industries in order to reduce the level of NPAs in these sectors,” it said.

The RBI inspection also detected that the bank exceeded its exposure limits in several cases. In the case of Unity Infra Projects, as against the exposure limit of Rs 32.50 crore, the bank extended Rs 47.08 lakh. The bank extended an amount of Rs 239.56 crore to state-owned MKVDC as against the limit of Rs 32.50 crore.

... contd.