10 weak banks to benefit from Rs.8,586 crore capital infused by the Centre

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A top leader of the All India Bank Employees’ (AIBEA) said that the Centre will be infusing fresh capital that amounts to Rs.8,586 crore into 10 weak banks. However, this is subject to commitment from the bank boards, employees’ unions, and management to abide by quarterly milestones. The move is contrary to the Government’s initial stand of infusing capital into strong banks.

The official also mentioned that SBI Caps will chalk out a bank-wise action plan on the basis of which a tripartite agreement will be created. The agreement will be between the bank management, the Government, and employees’ unions, and it will coalesce the stakeholders in the achievement of pre-defined milestones.

General Secretary of AIBEA, C.H. Venkatachalam said that the tripartite Memorandum of Understanding (MoU) will commit all the parties involved to quantifiable and specific milestones that will be measured every quarter. He also stated that the reason for signing the memorandum is understood clearly, and AIBEA is looking forward to it.

Parameters affecting the MoU milestones

Venkatachalam said that the Government has mentioned five parameters that decide the milestones. These include:

  • Active management of NPA, i.e., non-performing assets, and reinforcing the lending and monitoring procedures
  • Scheme for disposal of non-core assets
  • Organising capital from the market
  • Cutting back on operational costs such as employee benefits
  • Divesting stakes in subsidiaries and closing domestic and international branches that are at a loss

Bank unions meet in Kolkata

Venkatachalam opined that the unions may agree to all the terms except the one concerned with raising of equity capital from the market.

“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, then all the Government owned banks will be very much profitable,” he said. Venkatachalam also mentioned that capital adequacy norms are for private banks and are not applicable to Government owned banks.

All bank unions are expected to meet in Kolkata on 24th March, 2017 to discuss the proposal. The Government has also asked the heads of the 10 banks to provide their approval on the new strategy.

Banks that will benefit from the proposal

Venkatachalam said that the banks benefitting from the Government’s proposal are:

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

He also stated that the UCO Bank management will be meeting the bank unions to brief them about the Government’s strategy.

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