Mumbai, Feb 22: Uco Bank is set to post a net loss of over Rs 190 crore in fiscal 1999, bringing down its capital-adequacy ratio to 4.7 per cent and, thus, making its turnaround a distant dream. The revised draft report of the special committee of the board of directors, which has painted the grim picture, will come up for discussion at a crucial board meeting on March 5.The committee -- comprising four directors on the Uco board SK Dasgupta, S Ravi, Mercy Ravi and YK Sharma -- has recommended a four-pronged strategy to save the bank: retrenchment of 7,000 employees in three phases, infusion of Rs 400 crore worth of recapitalisation funds over the next two years, non-implementation of the impending wage settlement and mobilisation of Rs 200 crore worth of subordinated debt. Besides, it has also recommended reduction in the retirement age to 58 to save on expenditure.
However, workman director on the board YK Sharma has issued a dissent note on downsizing the staff strength, closure of unviable branchesand deferment of the wage settlement. "In the face of stiff resistance put up by Sharma, the board may not be able to take any tough decision," insiders said. However, the finance ministry is believed to have made it clear to the management that it can no longer defer "unpleasant" decisions.
Commenting on the "dismal" performance, the committee said the bank has failed to reach the targets of the three-year strategic revival plan (SRP) drawn up jointly by the management and the unions in April-May 1997. Outlining the bank's "depressing" achievements, the committee said:
The deposit growth was pegged at 17.20 per cent in 1998 against the targeted 20 per cent; in the first half of 1999, the growth is 6.13 per cent; -- The growth in credit in the first half is -1.4 per cent against the targeted 18 per cent;
The percentage of non-interest income to total income has sharply dropped from 10.8 per cent in 1998 to 8.99 per cent in the first half of 1999;
The bank has not been able toclose any unviable branch against the target of 30 branches;
The bank suffered a net loss of Rs 96.21 crore in 1998 against a projected loss of Rs 9 crore. The operating profit in the first half of 1999 was Rs 1 crore against the target of Rs 190 crore.The only area where the business growth is "satisfactory" is the bank's investment portfolio and the yield on investments at 12.44 per cent has surpassed the targeted 12.11 per cent.
According to the committee, the bank is likely to suffer a net loss of Rs 196 crore in 1999 which will be reduced to Rs 50 crore in fiscal 2000 and Rs 20 crore in March 2001. The capital-adequacy ratio of the bank will be eroded to 4.7 per cent in March 1999 and, subsequently, 2.7 per cent and 1.9 per cent in fiscal 2000 and 2001.
"After reviewing the productivity (of employees) and the performance of the bank over the last eight years", the committee has found "no other alternative" but to reduce the staff strength by 7,000 in three phases. It has suggested theformulation of different sets of voluntary retirement schemes "suiting its need and capacity to absorb the financial burden".
It has also suggested that the implementation of the latest wage settlement should be deferred till the bank earns "adequate profit". It is also in favour of reducing the retirement age to 58 from 60 "which will enable the bank to reduce its expenditure on staff". Besides, the committee wants the bank to close down at least 200 non-viable branches over the next three years.
WHAT THE DOCTOR PRESCRIBED
Retrench 7000 staff in 3 phases
Close down 200 branches in 3 years
Defer wage pact till the bank earns profit
Reduce retirement age to 58
Infuse Rs 400 cr recap funds in 2 years
Float Rs 200 crore 7-year subordinated debtCopyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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