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Weak public sector banks to trim operations - Views on News from Equitymaster
 
 
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  • Mar 7, 2000

    Weak public sector banks to trim operations

    As part of the revival plan of the three weak public sector banks UCO Bank, United Bank and Indian Bank, the government has ordered these banks to shut down their international operations. They have also been asked to rationalise their existing branch networks.

    The bank management's have begun talks with trade unions to introduce voluntary retirement schemes too. The turnaround plan would be monitored by the proposed Financial Reconstruction Authority which would be set up as announced in the recent budget.

    Another announcement in the Union budget 2000-01 was on the recapitalisation of weak banks. This recapitalisation would aim at specific revival programs of these banks like voluntary retirement schemes and an asset reconstruction company. The government estimates that these bank's recapitalisation needs would require Rs 8 bn in the next financial year but their total requirement stands at Rs 15 bn.

    The Government has continued to support the weak PSU banks even though its fiscal position has deteriorated. This would be done at the cost of the tax payers earnings in the name of public welfare. However adequate steps are not being taken to make these banks efficient. Funding by itself is not a solution to tackle the existing problems of these banks. What needs to be done is to change the mindset of these public sector employees which would require some harsh steps including closure of some branches and retrenchment of some employees.

     

     

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