"There may be a drastic restructuring of the Indian Bank board as, after all, the board is responsible for the functioning of the bank," sources in New Delhi said. The government had pumped in Rs 1,850 crore over the last two years to recapitalise the bank and yet the bank continues to sink under the burden of non-performing assets. Its accumulated losses as on March 31, 1999, rose to 3,181.88 crore against a net worth of Rs 2,898.63 crore.

Sources close to the Reserve Bank maintained that Indian Bank, being a 100 per cent government-owned bank, would not be allowed to fail.

"Its failure will trigger a crisis of confidence in the entirefinancial system. Depositors' money is safe with Indian Bank. It will not fail," sources said. Indian Bank's deposit growth during the year was 18 per cent-up from Rs 15,423 crore to Rs 17,156 crore.

"With close to 27,000 employees spread over about 1,500 branches, the option of closing down the bank is completely ruled out. It cannot also be merged with any other bank or financial institution as the sheer size of this bank can pull down any institution. The only option is to restructure the bank and its board and make the board accountable for its performance," a highly placed source said.

Both the RBI and the finance ministry are awaiting the report of the MS Verma panel on weak banks before finalising any view on Indian Bank. The Verma panel is expected to submit its report over the next two weeks. When contacted, Verma refused to comment on the Indian Bank issue saying: "The report will focus on weak banks and not any particular bank".

However, sources in Delhi said a drastic revamp of the bank ison the cards which will include a reduction in workforce through the introduction of a voluntary retirement scheme (VRS), a change in the business profile and enforcing accountability in the management for the bank's performance."The government cannot keep on pumping in funds to keep a bank afloat... No promise can be open-ended," sources said.

The present Indian Bank chairman and managing director TS Raghavan took over in December last year when his predecessor S Rajagopal shifted to Mumbai to head Bank of India.

Incidentally, the strategic revival plans (SRPs) of all the three weak banks-Indian Bank, United Bank of India and United Commercial Bank-have failed as the managements could not achieve the growth projections they committed themselves to while accepting the recapitalisation funds. Instead of focusing on business growth all the three banks merely used the interest on recap bonds to boost their bottomlines.

INSIGHT:

Strong remedies needed

Any move to restructure the topmanagement is welcome. But reality is that even a new management can do precious little unless it has a free hand in restructuring the bank's operations and balance-sheet. While a complete closure is ruled out, the closure of loss-making branches and sale of assets is a must. A VRS should also be on the agenda. The bank is facing a situation where fewer and fewer assets have to earn a return to service all its liabilities. This situation has to be remedied. A change in the board could be the beginning of the reengineering process.

-- Aaron Chaze