Financial Daily from THE HINDU group of publications
Monday, Mar 18, 2002
Public Sector Banks
Money & Banking - Public Sector Banks
Indian Bank recap may come with riders
Sarbajeet K. Sen
NEW DELHI, March 17
THE Government has decided to extract its pound of flesh from Indian Bank against the promised Rs 1,300-crore recapitalisation support that it has committed to the bank.
This time around, the Centre is considering laying down tougher conditionalities for the bank including extracting certain commitments upfront that would require the bank's management to take its entire staff into confidence during the final push towards a turnaround.
According to highly-placed official sources, the conditionalities under consideration include a complete wage freeze till the bank shows definite signs of turnaround and an assurance extracted from the unions that they would give the management a free hand in matters of staff transfers.
There is also likely to be a moratorium placed on the payments of any arrears due to the employees on account of previous wage revisions.
"The S.P. Talwar Committee had suggested that some sacrifices would have to be made by the bank against the capital support. We are working on the details of the nature of the sacrifices that would be required," senior Finance Ministry officials told Business Line.
They also said that the conditionalities that would be imposed on the bank would be only aimed at ensuring that the turnaround would be a lasting one for the bank. Indian Bank is the last of the previous set of weak banks being currently nursed by the Government.
"We do not want to see a recurrence of what the bank has gone through during the past several years. The current recapitalisation exercise should be the last one for it. Everyone must understand that we are committing scarce resources of the Government for the good of the bank. For this, some sacrifices have to be made by the bank as a whole," officials said.
The sacrifices that would be expected from the bank would form part of a detailed restructuring plan that the bank would have to submit to the Government. "We are talking to the Indian Bank management. They would have to give us a plan for the next couple of years," officials said.
The restructuring plan would include targets that the bank would set for itself regarding profits, pruning of non-performing assets (NPAs), rationalisation of loss-making branches and its plans for loss-making subsidiaries.
Officials said that the second tranche of recapitalisation during the current exercise would depend on the progress shown by the bank against the commitments given by it.
The current recapitalisation exercise for the bank contemplates a two-stage capital infusion spread over two financial years. At the end of it, the bank is likely to a beneficiary of another Rs 2,000 crore from the Government.
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