Bankers expects fresh reforms to push ahead
The banking industry is expecting the Finance Minister, Mr.Yashwant Sinha, to unveil a package of measures in the forthcoming Union Budget for 2000-01 to push ahead with the second-generation reforms in the financial sector.
Top officials of public sector banks said that they expect the Finance Minister to officially spell out the Government's intent to come up with legislative amendments for the reduction of its holding in public sector banks below 51 per cent.
Bankers are also awaiting the announcement of the introduction of a voluntary retirement scheme to enable the banks to downsize their existing manpower.
For the weak banks, bankers are hopeful of the Government announcing the broad framework for setting up of the first Asset Reconstruction Fund managed by an independent asset management company, besides announcing another heavy dose of recapitalistion to be spread over three banks-Indian Bank, UCO Bank and United Bank of India.
Bankers feel that the move to reduce Government equity in banks to below 51 per cent has already gained wide consensus.
They pointed out that the need for a provision to allow banks to access tier-I capital on an on-going basis is also being understood by the representatives of the employees' unions.
The report of Narasimham Committee on financial sector reforms, which has been the driving force behind the Government's efforts to bring about structural; changes in the banking industry, had suggested the reduction of Government holding in the PSU banks to 33 per cent.
The issue of ushering in a VRS package for the banking industry has been under discussion between the Ministry of Finance and the bank management for the past few months.
However, the Government has been finding it difficult to iron out the differences within the industry on the features and the amount of compensation to be included in the scheme.
Bankers feel that keeping the differences within the industry in view, the Government would only outline a broad framework, thereby giving enough flexibility to the individual banks to modify the features according to their requirements and capabilities.
The M.S. Verma Committee on restructuring weak public sector banks suggested the setting up of an ARF with an AMC to manage.
The ARF has been proposed to take over the bad debts of the weak banks, and to sell them at a later date at an appropriate price thereby substantially cleansing the balance sheet of the banks.
"It would be desirable to develop a structure which will combine the advantages of Government ownership and private enterprise. The broad structure would be that of a Government- owned ARF managed by an independent private sector AMC," the Verma Committee had said.
The Government recapitalisation support to the weak banks, the Committee, which had submitted its report in October 1999, had suggested that the overall financial support for the three banks would be about Rs. 5,500 crores.
It had said that the immediate requirement of Indian Bank itself would be Rs. 1,000 crores to meet the capital adequacy requirements.
Source : MI
Feb 14, 2000 |
