RBI Dy Guv sees red over ‘system-generated’ NPAs

Chakrabarty asked how could an inanimate “system” (computer) generate NPAs and said the capital markets regulator Sebi should look into this issue. “Should not the market regulator (Sebi),who is dealing with listing,should take action against the banks?” he asked.

Chakrabarty also asked how banks were unable to identify NPAs even after computerisation: “So long as ‘system-generated’ NPAs were not there,was the computer giving wrong figures?”

The RBI Deputy Governor’s comments came after several banks reported massive dent in their profits over the last fiscal and attributed it to migration to the computer-aided approach to identifying bad loans.

Central Bank of India reported a net loss of Rs 105 crore for the quarter ended March 31 on the account of significant rise in provisions for non-performing loans. The gross NPA ratio went up to 4.83 per cent as against 1.82 per cent over a year ago.

During the year ended March 31,2012,the net profit of Union Bank of India stood at Rs 1,787 crore,down 14 per cent over the year-ago period. The gross NPA ratio stood at 3.01 per cent during the quarter ended March 2012 as against 2.37 per cent in March 2011.

Canara Bank made a net profit of Rs.3,283 crore in 2011-12,a decline of 23 per cent over the previous year. Its total provisions amounted to Rs 2,660 crore of which NPAs accounted for Rs 1,294 crore

“I do not want to negate what he (Chakrabarty) said. But it is not that on a very big scale the bankers have all of a sudden come out with this situation,” Central Bank CMD MV Tanksale said.

Union Bank of India’s newly appointed CMD D Sarkar conceded that in the manual system of NPA recognition,some liberty was taken during external or internal audits,while the new automated approach takes a very methodological view on the issue.