Weak Banks Decision On Monday

The fate of the three weak banks, namely, Uco Bank, Indian Bank and United Bank of India (UBI) will be decided on May 22, when the much-awaited verdict on the restructuring proposals of the three banks will be given by the finance ministry. The three banks have submitted their revival plans recently.

The outcome of the forthcoming meeting between the bank chiefs and the ministry officials is extremely crucial as a number of significant decisions are yet to be taken in these three banks.

These decisions are primarily with regard to viable operations, downsizing of employees and wage hike. More importantly, grant of financial assistance will depend on the feasibility of these plans.

 

The ministry, which is currently examining the revival plans of the banks, will either give a go-ahead signal to the banks or ask them to revise their plans incorporating the suggestions of the government. However, the meetings will be held individually with the bank chiefs and bank specific decisions will be taken.

The employees of the banks are closely watching the situation and the unions are ready to give a stiff resistance to any kind of unfavourable decision, sources said.

While Uco's restructuring plan was focused on the possibility of achieving a net profit position, that of UBI has highlighted the sustained profitability of the bank. UBI is expected to post net profit for the third consecutive year.

But in general, the banks have taken into consideration the positive orientations and are also focused on reduction of non performing assets (NPA), better yield on advances and lowering of operation costs.

It may be mentioned that last year, no financial assistance came from the government.

In 1998-99, UBI and Indian Bank got recapitalisation funds to the tune of Rs 100 crore each, while Uco got Rs 200 crore.

In 1997-98, the finance ministry extended support to the tune of Rs 100 crore to Uco Bank. In 1996-97, UBI got Rs 338 crore and Uco got Rs 54 crore.

The M S Verma committee report on weak banks had stated that capital infusion in case of Indian Bank was imperative to ensure its continued operations. This apart, the panel had suggested that the overall cost of restructuring the three banks would be in the order of Rs 5,500 crore.