MUMBAI, February 23: The Indian Banks' Association (IBA), the representative body of commercial banks, has mooted 100 per cent divestment of the government stake in public sector banks and advocated mergers and acquisitions as a strategic move for consolidation in the industry as smaller banks will not be able to survive competition.Top IBA officials, led by chairman A T Pannir Selvam, met M Narasimham (who is now formulating the second stage of banking reforms) on Monday in Mumbai to formally present the association's agenda for the banking sector reforms.
State Bank of India chairman M S Verma, Bank of India CMD M G Bhide and Bank of Baroda chief K Kannan met Narasimham to represent the industry's point of view. The chiefs of financial institutions also met Narasimham, the architect of banking sector reforms, during the day.
On the divestment of the government stake, IBA said: "It is suggested that the government stakeholding now mandatory up to 51 per cent may be removed. Banks should be allowed toaccess 100 per cent capital from public either from domestic or international capital market. This will increase the accountability of banks to shareholders."
The IBA is also in favour of working out an "exit route" to reduce the surplus staff in the industry. Among other things, IBA has called for a "hands-off" policy from the finance ministry, macro management by the government leaving the micro issues to bank managements and freedom for bank boards to appoint top executives like chairman-cum-managing directors (CMDs) and executive directors (EDs).
The bankers' body is also in favour of model code of corporate governance. The other major recommendations of IBA include creation of an asset reconstruction fund (ARF) to take over the non-performing assets (NPAs) of banks at a discount, legal reforms and tax reforms to create an ideal environment in tandem with the needs of banking sector, abolition of the lead bank scheme, phasing out of direct lending and paring of minimum priority sector lendingstipulation. It has also called for different capital adequacy ratio for different banks instead of the prevailing uniform CAR of 8 per cent.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
