ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Restructuring Banks Capital-Need for an Integrated Approach

Need for an Integrated Approach N P Kurup TO get out of the muddle of partial privatisation, about which I wrote earlier (EPW, September 10,1994), the government has promulgated the Banking Companies (Acquisition and Transfer of Undertakings) Amendment Ordinance on January 21. The ordinance became urgent to facilitate finalisation of the balance-sheet and profit and loss statement of Punjab National Bank, which unwittingly became a victim of structural reforms in the banking sector. On the merger of New Bank of India with PNB in September 1993, PNB came to be saddled with New Bank's accumulated losses of about Rs 430 crore. The perfunctory amalgamation scheme contained no provision about the manner in which the losses have to be absorbed. But PNB took a firm stand that notwithstanding the 100 per cent government ownership of both the banks, the losses should be borne by the government retrospectively from the date of merger. Pending acceptance of its demand, the bank did not finalise its accounts as on March 31, 1994.

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