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Weak Banks: A Strategy for Self-Renewal
The two approaches to 'weak' public sector banks, represented by the reports of the Verma Committee and the Task Force of the CII, have provoked high-pitched reactions. What is important, however, is that the different stakeholders - the government and the Reserve Bank, the managements of the banks and the unionised employees - agree on a framework within which the banks could be attempted to be rehabilitated. Three ground rules are suggested here for the purpose.
On the matter of the ‘weak banks’– Indian Bank, UCO Bank and United Bank of India – we now have two views. The Verma Committee set up to study the revival prospects of these banks had submitted its report sometime back and we had occasion to comment on it some weeks ago in this journal (November 27, 1999).
More recently, the Task Force appointed by the Confederation of Indian Industries (CII) on non-performing assets (NPAs) in the Indian financial system has published a report. It gives a gloomy prognosis on the three ‘weak’ banks. In the opinion of the CII Task Force, these entities are open sores that threaten the health of the entire financial system and are not viable candidates either for privatisation or for merger. They need to be closed down.
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