Employees feel that the parent, Canara Bank, has neither given any clear directions for furthering its activities nor announced a suitable golden handshake. The company is facing an erosion in its networth following a setback it suffered in the securities market seven years ago. The staff strength of the subsidiary has come down from 182 in 1992 to 110 in 1998. Canfina stopped its merchant banking activities due to problems of exposure in the securities market during 1991-92 resulting in a liquidity crunch.

The non-banking finance company was surviving on research and training (R&T) activities and lease rent recoveries. However, in February 1997, the Securities and Exchange Board of India issued a show-cause notice to Canfina to discontinue its R&T activities which were bringing in most of its income.

Thechairman and managing director, TR Sridharan, said, ``We are not looking at the VRS alternative because we need employees to maintain the Rs 900-crore asset base of the subsidiary.''

He further said the subsidiary's merchant banking licence has already been transferred to Canara Bank and once a settlement is drawn out with the ministry of finance, the subsidiary will be recapitalised. The bank has plans to settle the issue by September 1998 and therefore there is no need for panic among employees. ``All banks need a good merchant banking arm,'' he added.

Sridharan said that the bank is awaiting the finance ministry's nod for structuring a settlement with regard to the dues under the portfolio management services and corporate investment advisory services to public sector undertakings. Canara Bank would like to settle the dues over a period of 10 years so that this does not impinge significantly on the bank's bottom line.

According to him, the bank is currently negotiating with nine PSUs, including OilIndustry Development Board (OIDB), IRFC and NTPC to recover Rs 600 crore assured interest on bonds that the bank has been holding.

It is in the interest of the bank to structure an early settlement because the Canfina dispute alone has eroded the bank's profit margins to the extent of Rs 150 crore during 1997-98.