Millennium Post

Invisible power play

It could be easily the biggest scandal surrounding top government appointments under the UPA regime seemingly spiced with all those ingredients as political influence, invisible power play by a top cabinet minister and arbitrariness that would make a good script for a Bollywood potboiler.

Reports surfacing on what exactly went on behind the selection and appointment of Archana Bhargava as the executive chairperson (CMD) of historically credit-sharks controlled nationalised United Bank of India (UBI) are more shocking than last year’s Railway Board recruitment scandal that cost Railway Minister Pawan Bansal’s job.

Speculations about the Central Vigilance Commission (CVC) not finding her fit to lead a bank and negative appraisal by her boss in Canara Bank, which she briefly served as an executive director before being appointed as UBI top dog, had fuelled gossip in the banking and finance circles about how her nearness to a powerful Congress minister in the UPA government and her family’s connection at a very high level in the party helped her getting the job. Despite allegations of her steamrolling decisions to grant credits to parties with questionable collateral quality and business conduct and an ongoing investigations into those deals, her smooth exit from the Bank on ‘voluntary’ retirement have raised eyebrows both in the public sector banking industry and government. While she was at the helm only for 10 months, Archana Bhargava was reportedly running the affairs of the bank like a dictator, often upsetting her direct reporting executives, who were critical of her for pushing the line of acceptable.

Despite her bio-chemistry degree and HR background, Archana Bhargava, propped up by powers that be in Delhi, seemed to have failed to strike a good chemistry with her colleagues on the fifth floor of the sprawling UBI building, the headquarters of the bank, in Kolkata. Her aggressive style of doing business was probably more suited to non-conventional banking instruments such as dealing in puts, options and derivatives and buy-sell mutual fund operations than conservative banking operations which every shrewd and successful banker are adept to. The funniest story about Bhargava was how on one day she sent her subordinates on a hunt to look for her missing dog.

The grapevines say that despite opposition from other directors on the bank board, Bhargava cleared a Rs 100-crore loan to a real estate developer in her typical feudal operational style. As many as 10 general managers of the bank had complained to both the Reserve Bank of India (RBI) and the union finance ministry about how she arbitrarily okayed the loan overriding the board’s dissent. Incidentally, RBI had put curbs of the bank sanctioning loans over Rs 10 crore to a single account due to a big pile-up of bad debt. Under Bhargava, UBI was indulging in somewhat cowboy style banking. With mounting bad loans that were traditionally under reported, UBI’s books of accounts came in for a forensic audit by RBI in November, probably first time in a nationalised bank, which revealed some of the most distressing data with regard to its quality of assets and management practices. The forensic audit was believed to have mentioned that some of the accounts were restructured without a viability study and there were others, which were not eligible for special dispensation, were not down graded.

Over Rs 5,500 crore disappeared from UBI’s chests in broad daylight in a kind of systematic heists by a bunch of rogue business borrowers who must have happily falsified the quality of mortgages to rob the bank, may be in connivance with bank officials in many cases. The robbery in the UBI would have probably been under reported and remained under the carpet but for the forensic audit conducted by the investigative agencies. It was a financial mayhem at the public sector bank, which was re-capitalised by the government by pumping in an additional fund of Rs 800 crore to its equity only last year to help the bank maintain the minimum capital adequacy ratio. And, the fraud had supposedly taken place even after the warning from the RBI and the department of banking operations under the finance ministry.

The result was that the state-run lender came perilously close to flirting with the collapse line amidst reports are of a deep-running malaise of asset mismanagement, under-reporting of financials and activities that may not necessarily qualify as legal. In the first quarter under Bhargava’s leadership, UBI’s profits fell 74 per cent to Rs  44 crore – from Rs 174 crore in the corresponding period a year-ago. Thereafter, the bank notched up losses of Rs 489 crore and
Rs 1,238 crore in the following quarters, respectively. In three quarters, gross NPAs shot up from Rs 2,963 crore to Rs 8,545 crore, while its capital adequacy ratio (comprising of Tier I and II capital) fell to 9.01 percent, precariously close to the nine percent requirement under the international Basel norms. Currently, an investigation by RBI is on. To save the situation, the government, which owns over 80 per cent of UBI’s equity, has decided to pump in Rs 1,000 crore towards further recapitalisation.

The financial mess in UBI needs to be also investigated by the apex agency, CBI, sheerly because of the huge loss of public fund which could not have occurred without indulgence from some highly corrupt bank officials. Such a CBI investigation must also identify the invisible hand in Bhargava’s entry and, even more importantly, her sudden exit from UBI without taking any responsibility of running the bank into a brink of bankruptcy.

Who let Bhargava in and out of RBI so easily? In normal circumstances, Bhargava would have been required to stand trial for criminal negligence leading to massive loss of public funds. Why is it not being done? Who is her protector? The case warrants to be viewed in a much bigger context not only with regard to the selection process for future bank CEOs, but also the need for conducting similar forensic audits in other public sector banks to ascertain the latter’s assets quality before it is too late.

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