United Bank CMD’s NPA provisioning backfires

 Most PSU banks have been hit hard by rising bad loans during the current fiscal, but none as badly as United Bank of India. The Kolkata-based bank reported a Rs 490-crore loss in the second quarter due to high provisions for non-performing assets (NPAs). One reason bankers cite for this spike in loss is the “new CEO effect”. Typically, on taking charge in PSU banks, a new CMD immediately makes higher provisions than usual for bad loans and other liabilities, thereby depressing profits. This prepares the ground to report a sharp turnaround in profits after a year. This time, however, the higher provisioning made by United Bank’s CMD Archana Bhargava, who took charge in April, appears to have backfired. Alarmed by the sharp rise in NPA, the government has restricted grant of new loans and has placed the bank under scrutiny, subjecting its bad loans to a forensic audit. This will hurt business and make it difficult for United Bank to grow its way out of its problems. 
TOI