MUMBAI, February 23: Even before the Narasimham Committee has tabled its recommendations on the second phase of banking sector reforms, bank unions are bracing themselves up for a face-off with managements.The managements, represented by the Indian Banks' Association (IBA), has called for mergers and acquisitions as a means of consolidation and total divestment of the government stake. It is also in favour of finding out an "exit route" to slash the excess flab in the industry.
"We know what all they are recommending. Basically, the IBA is voicing the government's concern. We will chalk out our plan of action," SR Sengupta, general secretary of the All India Bank Officers' Confederation (AIBOC), the largest association of bank officers in the country, told The Financial Express. Speaking from Calcutta, Sengupta said, "The Centre is using the IBA to put forward its proposals." Nine bank unions under the umbrella of the United Forum of Bank Unions (UFBU) will meet in Calcutta on February 26 tochalk out their course of action.
The Indian Banks' Association, in its presentation to the Narasimham Committee, has suggested that banks be allowed to expand their branch network or close branches based on the operational efficiency and potentiality of the Centre. "Merger of the branches should also be permitted to cause lesser inconvenience to consumers," the IBA has suggested in its presentation. "In order to improve the quality and speed of operations, it will be essential to allow growth of organisational structure purely on commercial considerations," IBA has suggested.
IBA has said that the size and composition of the organisational structure in the administrative set up should be left to individual banks. The number of regional and zonal offices and mode of controlling the branches should also be left to the banks. "Flexibility for opening the controlling offices and closing them for speeding up the process of decision making will be necessary to put the banks on a faster track," IBA said. IBAhas also suggested that banks be permitted to go in for strategic alliances to use the synergy of strengths and at the same time to realign the business mix and to shed inappropriate business. IBA has said that strategic alliances would help the banks to avoid the need to handle businesses which do not match their core competence.
WHAT THE IBA WANTS
Operations
Wholly divest government's stake in state-run banks; let banks access 100 per cent capital from public within or abroad
End dual control; RBI should focus on macro-management, leaving micro-management to banks
Management Encourage mergers as a matter of strategy as small banks will not be able to survive competition
Allow banks to go in for strategic alliances; merge, close down or expand branches
Give bank boards freedom to appoint EDs and CMDs. Let large banks have MDs and deputy MDs as with State Bank of India
Clip the wings of the vigilance commission. Let banks handle stafflapses and decide whether they are commercial decisions or not
Prescribe a model code of corporate governance to define accountability Profitability
Let banks float deep-discount bonds; keep such long-term resources outside the purview of statutory pre-emptions
Allow banks to invest/borrow overseas up to 100 per cent of tier-I capital
Let only borrowers maintain CRR on inter-bank borrowings; give market-related interest rates on CRR
Pare stipulation on priority-sector lending to 10 per cent; channel priority lendings through regional rural banks
Create an asset reconstruction fund to take over bank bad loans at a discount
Redraft the Negotiable Instruments Act, Companies Act, Transfer of Property Act, Indian Stamp Act to change the legal environment in tandem with banking sector's needs; grant tax benefits on provisions against NPAs.Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
