Centre to infuse Rs 8,586 crore capital in 10 weak banks

Contrary to its earlier stand of infusing fresh capital in strong banks, the central government has decided to infuse fresh capital totalling Rs 8,586 crore into 10 weak banks subject to commitment to quarterly milestones by bank boards, management, employees and unions, said a top leader of All India Bank Employees` Union (AIBEA).

He also said SBI Caps will draw a bank wise action plan based on which a tripartite agreement between the government, bank management and employee unions will be signed committing themselves towards certain milestones.

"The central government has written to the heads of 10 banks indicating the amount of fresh capital it would infuse during FY2017. But the infusion is subject to a tripartite agreement between the central government, banks and the unions for a time bound turn around programme," C.H. Venkatachalam, General Secretary of AIBEA, told IANS on Sunday.

He said the government has said that the tripartite Memorandum of Understanding (MoU) is to commit all the three parties to specified and quantifiable milestones to be measured on quarterly basis.

Venkatachalam said the reason for signing the MoU is understandable and AIBEA is ready for it.

He said the central government has listed out five parameters under which the milestones would be fixed. 

These are: (a) active management of non-performing assets (NPA), strengthening of lending and monitoring processes; (b) arranging capital from the market; (c) plan for disposal of non-core assets; (d) divesting stakes in subsidiaries, closure of loss-making domestic and international branches; (e) reduction in operational expenses including employee benefits to would be reversed once the banks turns around.

According to Venkatachalam, the unions may be agreeable with all the conditions barring the raising of equity capital from the market as it would result in disinvestment.

"All the government-owned banks are making good operational profits. The net profit is low owing to provisions for bad loans. If only the bank management focus their energies on recoveries than all the government owned banks will be very much profitable," Venkatachalam said.

He said the capital adequacy norms or the Basel norms are for private banks and need not apply for government owned banks. "All the bank unions will be meeting in Kolkata on March 24 to discuss the government`s proposal," Venkatachalam said.

He added the government has asked the heads of the 10 banks to give their consent on its new proposals. Venkatachalam said the name of the banks and the amount of capital to be infused by the government are:

Allahabad Bank (Rs 418 cr), Andhra Bank (Rs 1,100 cr), Bank of India (Rs 1,500 cr), Bank of Maharashtra (Rs 300 cr), Central Bank of India (Rs 100 cr), Dena Bank (Rs 600 cr), IDBI Bank (Rs 1,900 cr), Indian Overseas Bank (Rs 1,100 cr), UCO Bank (Rs 1,150 cr), and United Bank of India (Rs 418 cr).

Venkatachalam said the Kolkata-based UCO Bank management is likely to meet the bank unions and brief them about the government`s proposal.

"No other bank management has called the unions for a discussion. Perhaps this would happen soon," Venkatachalam added.