Close down IB, UCO, UBI; Privatise BoB, SBI, Corp., Oriental: CII

New Delhi, Dec 15 (UNI) A Task Force of the Confederation of Indian
Industry (CII) has recommended closure of three nationalised banks,
including the Indian Bank, and privatisation of State Bank of India
and three others.
   Strongly opposing a proposal for yet another recapitalisation of
the Indian Bank, United Bank of India and UCO Bank, the Task Force
on Non-Performing Assets (NPA) in its report released Wednesday said
any move to restructure these banks ''is akin to artificial
respiration. 
It will not solve the problem and continue soaking up scarce tax
payer funds from a fiscally constrained exchequer.''
   The Task Force was headed by Mr K.V. Kamath, Managing Director
and CEO of ICICI.
   Talking to reporters, Mr Kamath said the Task Force did not
however ascertain to what extent the burden of non-performing assets
would come down following closure of the three sick banks.
   Recapitalisation of these banks have been done twice already and
the Verma Committee set up by the government suggested yet another
restructuring at a cost of Rs 55 billion.
   However, according to the CII Task Force the three three banks
''are in a terrible shape in terms of any banking yardstick and
beyond restructuring'' and there was no guarantee that these would
not slip into the red again.
   The net cost of closing down the banks would be Rs 74.34 billion
Indian Bank Rs 27.23 billion United Bank Rs 25.53 billionand UCO
Bank Rs 21.58 billion the task force says.
   The closure should be based on the principles that depositors'
money would not be harmed and employees would get good severance
pay. The process should be carried out in three phases -- moving
deposits to good banks, paying out to employees except ten to 15 per
cent of staff needed in the hiatus and selling properties and
branches and paying out residual staff. 
   On the privatisation proposal, CII President Rahul Bajaj, who was
also in the 15-member Task Force, said under globalisation the
government did not have to be in the banking business. It should get
out gradually.
   On the criteria for suggesting Bank of Baroda, Corporation Bank,
Oriental Bank of Commerce and State Bank of India for privatisation,
Dr Omkar Goswami, another task force member, said these were already
listed in the market, besides having capital adequacy, solvency
ratio, low equity ratio and maximum passible spread.
   ''Also, good banks might like to be privatised,'' Mr Bajaj said.
   Regarding Asset Reconstruction Companies (ARCs), the CII report
argues that these must never be used to bail out weak banks.
Instead, ARCs need to be structured very carefully to assist
relatively better performing banks and financial institutions.
   The report also suggests wide ranging reforms on bankruptcy
restructuring, Debt Recovery Tribunals and liquidation processes.
Instead of getting indefinite stay on creditors' claims as is the
case at present the BIFR should act like a facilitator to decide
cases within 180 days. 
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