The Rs 300-crore capital injection in UCO Bank by the government looks suspiciously like yet another instance of throwing good money after bad. If UCO Bank has not been able to turn around in these relatively protected times, it will be even more difficult for it to survive after competition hots up.

Nevertheless, many of the public sector banks have in fact turned around, and there is no reason why UCO Bank should not follow suit. The emphasis on recoveries is welcome. However, some estimates put the number of loss-making branches at 1200 out of a total of 1800 branches.

Merely closing 20 to 25 loss-making branches, therefore is not going to help. Some hard decisions need to be taken by the bank management, and closing several more loss-making branches must be considered. Reports also indicate that the UCO Bank unions seem to have realised the gravity of the situation, and will work with management to recover dues.

But gross non-performing assets stand at Rs 1592 crore, and it will be no easy task to recover this staggering sum. Simultaneously with recovery, new loans must be given, albeit cautiously. The bank management has said that it will take on only good credit risks. But good borrowers will only come to the bank if service improves drastically, and the bank unions will have to play a major role here. Cost-cutting too should be a top priority, and all employees should agree to making some temporary sacrifices. The government can help by waiving the targets for priority sector lending, enabling the bank to concentrate on high-value clients.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.