Three Weak Banks Submit Revamp Plans
Three weak public sector banks _-Uco Bank, Indian Bank and United Bank of India_on Monday proposed fresh restructuring plans for the medium term to the finance ministry.
The three-year plans suggested a total recapitalisation of about Rs 2,500 crore from the government, while promising radical staff and branch rationalisation.
The banks followed the recommendations of the M S Verma Committee, set up by the Reserve Bank early last year to come up with turnaround prescriptions for the three banks. But, one of the key suggestions of the committee_a wage freeze_was not accepted by the banks, since it irked the trade unions.
In their revamp strategies, the three banks showed keenness on an Asset Reconstruction Fund to deal with non-performing assets.
The Chennai-based Indian Bank sought the highest amount _Rs 1,700 crore_of recapitalisation to prop up its capital adequacy level from about 3 per cent to the minimum stipulated level of 9 per cent. Nearly 38 per cent of the total assets created by the bank have been eroded by its NPAs.
The bank received Rs 1,850 crore as recapitalisation during the last four years. But its unaudited results for 1999-2000, projected a Rs 55 crore net profit without providing for NPA.
The proposed recapitalisation fund will also be used to recast the bank's subsidiaries, particularly IndBank Mutual Fund, which has incurred a Rs 200 crore loss.
The Calcutta-based Uco Bank plans to cut its manpower by 4,000 till 2003. It expects another 2,000 to retire during the period which will bring down its wage bill as a percentage of total income from 23 per cent to 19.3 per cent.
The bank has sought a Rs 200 crore soft loan to fund the voluntary retirement scheme to be kept open for 12 months in 2001 and 2002. The staff strength at the end of 2003 is likely to drop from 31,402 to 27,180.
Uco Bank has sought a Rs 250 crore recapitalisation and plans to raise Rs 250 crore more through tier-II capital for maintaining its capital adequacy level at 10 per cent. It has received nearly Rs 600 crore from the government in the past three years.
Uco also plans to establish a three-tier organisation structure by removing the zonal tier and strengthening the regional offices. It is considering to merge or close about 75 branches.
According to the plan, the bank also plans to recruit about 1000 officers and 500 clerks who are information technology oriented, and spend about Rs 100 crore on computerisation. It is also lining up new products to aid credit expansion.
United Bank of India, another Calcutta-based bank, has over 60 per cent of its 1,200 branches spread over the north-eastern region of the country. UBI's financial viability depends on rationalising its branch network in that region, and accordingly the bank plans to either merge or close 20 per cent of its branches in the region.