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UBI blames Infosys for NPAs

United Bank of India has publicly blamed deficiencies in Infosys’s Finacle software for failing to identify non-performing assets in its small-loan accounts. However, Infosys dismissed the charge. A recent audit by the Reserve Bank of India has revealed the bank had followed a lax credit-appraisal process, which led to loans turning into NPAs, but the bank claimed that there was no intentional intervention to conceal bad loans. It accused Infosys of not rectifying Finacle, despite repeated requests. In a notice to Bombay Stock Exchange, the bank said wrong NPA classification 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 NPAs…For long, the bank said it has urged Infosys to rectify deficiencies in the Finacle system, the solution to some of which will be made available to the bank very soon. Infosys countered the charge saying Finacle had the proven ability and framework required for asset classification and NPA reporting, according to RBI norms, adding most banks in India that used Finacle were managing this quite well. Additionally, from time to time, Infosys said it provides enhancements in the features for its customer banks to test and deploy in their environment, to meet their business requirements. It also said the bank, through its application service provider HP, had recently approached the company with a request to implement this in its environment and the company is helping the bank in this regard.

Meanwhile, the finance ministry has ruled out any merger or closure of the bank. The ministry, on the other hand, has directed the bank to initiate an inquiry into the misreporting of bad loans as well as make all efforts to recover pending dues. Rajiv Takru, secretary, department of financial services, said the rise in non-performing assets of the bank is not a sudden event. It is a collection of NPAs over a period of time that was not faithfully reported by the bank and the ministry has now asked the bank to begin an administrative inquiry into the misreporting and take corrective action based on its findings.

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