The auditors, in their report have said that out of the interest income of Rs 110.80 crore on income-tax refunds, Rs 55.73 crore is yet to be allowed by the income-tax department and is dependent on the decision of the appropriate authorities. This, the auditors have said, is not in conformity with guidelines laid down by the Institute of Chartered Accountants of India (ICAI), which has resulted in overstatement of profit for the year.

Further, in respect of interest of Rs 12.44 crore on income-tax refund relating to assessment years 1993-94 to 1995-96, the order is yet to be received by the bank. However, UBI has already credited this amount under the head "interest earned - others". While in 1996-97 theamount under this head amounted to just Rs 2.64 crore, the bank has in 1997-98 accounted for Rs 119.20 crore under the same head.

UBI chairman and managing director Biswajit Chaudhuri, at the time of announcing the bank's results, had said that the net profit was achieved because of a Rs 110 crore benefit of interest on refund of income-tax during the year. But for this, the bank would have posted a net loss for the seventh year in a row.

The provision for pension liability to the extent of Rs 66.36 crore has also not been made by the bank. "Consequently, the profit is overstated and corresponding liability is understated to that extent," the auditors have stated in their report.

The auditors have also pointed out that leave encashment has been accounted for on a cash basis, which is a deviation from the ICAI guidelines. Accounting of certain other items of revenue has also been on a cash basis, which is in violation of the accounting norms. The auditors have been unable to ascertain the effect of suchdeviation on the profit & loss account.

UBI has also not disclosed the method of computation adopted for the revaluation of premises to its auditors. This is again a deviation from the accounting norms laid down by ICAI. Certain properties of the bank were revalued by approved valuers on March 31, 1998, which resulted in appreciation in the value of premises by Rs 59.43 crore. This amount has been credited under the head "capital reserve -- revaluation reserve".

UBI posted a net loss of Rs 113.64 crore and an operating loss of Rs 65.57 crore in 1996-97. The bank's capital adequacy improved to 8.4 per cent against 8.2 per cent in the previous year. It is currently weighing the option of raising funds under Tier-II capital to boost its capital adequacy ratio (CAR). The Reserve Bank of India has made it mandatory for banks to have a minimum CAR of 9 per cent by March 31, 1999.

An old trick

It is an old trick to inflate profit or to convert loss into profit by adopting imprudent accountingpolicies. Auditors can qualify the accounts but cannot force companies to re-write the accounts and qualifications are taken seriously neither by the management, shareholders or regulatory authorities. In the instant case, the regulatory authorities should take notice of this blatant violation of accounting norms. Such window-dressing is not a substitute for real change in the weak bank.