Mumbai, Feb 26: Indian Bank, Uco and UBI will be "subjected" to yet another round of revival study. This time, the MS Verma panel on weak banks will conduct the study.The Reserve Bank of India had early this month set up the working group to suggest measures for revival of weak public sector banks.
The committee held its first meeting in Mumbai on Thursday. Although it is expected to submit the report by June 30, the panel may take one more month to finalise its findings.
Speaking to The Financial Express, Verma said "We will study the three banks before finalising our recommendations. We will not restrict ourselves to an academic exercise."
A team of the working group will visit the headquarters of the Chennai-based bank as well as the two Calcutta-based banks in March. The team is expected to hold discussions with the bank managements as well as trade unions.
Rating agency Icra has studied all the three banks. Besides, the National Institute of Bank Management (NIBM) also worked on a turn aroundstrategy of Uco Bank which is currently implementing a three-year strategic revival plan. "There is no embargo on the existing recast plans which are being implemented in these banks," Verma said.
Incidentally, the Uco board is meeting on March 5 to discuss the report of the sub-committee which has recommended a job cut for 7000 people and closure of 300 unviable branches besides reducing the retirement age to 58 and shelving of the wage settlement to revive the ailing bank.
"While conducting the study, we will look into the findings of all the previous studies. We need to examine the recommendations and see whether they can be adopted," Verma said.
According to him, the major areas of concern are the bulk of non-performing assets (NPAs) in these weak banks and the work culture as well as the size of the workforce. "The pace of the business growth should justify the size of the workforce," he said adding that recapitalisation of banks is not a long-term solution.
The Narasimhamam Committee on bankingsector reforms has suggested the setting up of asset recontruction companies to bail out the weak banks instead of recapitalising them. Both the Narasimham panel as well has the Khan panel on harmonising the role of banks and financial institutions have made suggestions in favour of mergers between banks institutions and consolidation in the financial sector. "We will have to examine whether any of these weak banks are worth being merged with another entity," Verma said.
The five members of the Verma panel are Vysya Bank chairman and former Corporation Bank chief KR Ramamurthy, chartered accountant and former president of the Institute of Chartered Accountants of India MM Chitale, Icra managing director PK Choudhary, former RBI executive director JR Prabhu and former director of Indian Management Institute, New Delhi, Sushil Chandra.
The terms of reference of the working group are:
To frame the criteria for identification of weak public sector banks;Study and examine the problems of weakpublic sector banks;Undertake a case-by-case examination of the weak public sector banks;Identify those which are potentially revivable and suggest a strategic plan of financial, organisational and operational restructuring for weak public sector banks.Insight -- Pragmatic approach vital to salvage assets
Instead of shunting around the issue of weak banks amongst various committees, the government should take the most practical stand and create the asset reconstruction company to try and salvage the performing assets of the weak banks. A merger of weak banks with the stronger ones should not be an option at all as it will not be done willingly by the larger better PSU banks and it will amount to robbing hundreds of thousands of their shareholders to safeguard a few thousand jobs. The ARC would therefore be the best bet.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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