Ubi, Uco Wage Freeze Proposed
An internal note prepared by the department of banking operations and developments (DBOD) of the apex bank, recommending the wage freeze, was sent to the banking division, ministry of finance, last month, highly-placed sources said. "The ministry is favourably inclined towards accepting the recommendations," they said.
The "internal note" was based on the findings of the Investment Information & Credit Rating Agency of India (ICRA) which was appointed by the RBI to prepare a turnaround strategy for the two loss-making banks. "A similar move can be contemplated for other weak banks like Central Bank and Indian Overseas Bank," ministry sources said.
Uco Bank had accumulated losses of Rs 1,345.35 crore while UBI's accumulated losses stood at Rs 1,329.11 crore in March 1996. The Centre has pumped in Rs 842.43 crore in UBI and Rs 824.96 crore in Uco over the past three years as recapitalisation funds. Uco has a staff strength of 34,834 spread over a branch network of 1,793 while UBI -- the other Calcutta-based bank -- employs 22,566-odd staff in its 1,332 branches. "We are aware of the implications of the wage freeze on the industrial relations front. This is a very complicated issue. The inherent weakness of these two banks are their huge workforce and the lack of work culture," sources said.
The RBI has also mentioned the creation of an asset reconstruction firm and the introduction of a bank-specific golden handshake scheme. "The government will have to bear the expenses of the severance pacakge," the RBI note has reportedly stated.
The ICRA report was in favour of the creation of an asset reconstruction company (ARC) in Uco -- a non-banking solution to the problem of the bulging non-performing assets of the bank.
The idea is to float at ARC and passing on the NPA liability to the new company at ext three years as a necessary pre-condition for pumping in the recap funds in 1995-96.