Bad loans may make the future worse for United Bank of India

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United Bank of India that has 100 years old rich history may go through a very rough patch in coming times owing to bad loans. The banking sector has found it difficult to combat the downfall caused by bad loans and the same may make it difficult for United Bank of India to sustain. The current banking sector works on market driven structure and the weak capital structure will leave no room for certain banks.

The Kolkata Bank is suspected to have undergone the sudden downfall not just because of the weak capital structure or bad loans but it is also a result of wrong management decisions. The bank is known for taking poor management moves in last few years and this may have lead it to this condition. Reserve Bank of India has already ordered a forensic audit on the bank owing to its unsafe financial condition.

The suspicion about the malfunctioning of the bank arose in the last quarter that ended in December when the bank reported an abnormal loss of Rs. 1238 crore against its normal quarterly income of Rs. 2766 crore. The bank was in good financial condition till two quarters back and the sudden fall out in the last quarter had all reason to raise eyebrows.

The bank had reported too many bad loans below Rs. 10 lakhs amounting to a total of Rs. 2300 crore in last quarter. The whole numbers were difficult to digest as the main concern was that what went so wrong in just one quarter. The NPA detection system of the bank was also not working and that was another reason for worry, said the finance experts.

The uncontrollable rise in bad loans have been a major concern for other banks too and the timely control is inevitable.

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