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Centre to infuse Rs 8,586 cr capital in 10 weak banks

Chennai, March 19 Contrary to its earlier stand of infusing fresh capital in strong banks, the central government has decided to infuse fresh capital totalling Rs 8,586 crore into 10 weak banks subject to commitment to quarterly milestones by bank boards, management, employees and unions, said a top leader of All India Bank Employees' Union (AIBEA).


He also said SBI Caps will draw a bank wise action plan based on which a tripartite agreement between the government, bank management and employee unions will be signed committing themselves towards certain milestones.


"The central government has written to the heads of 10 banks indicating the amount of fresh capital it would infuse during FY2017. But the infusion is subject to a tripartite agreement between the central government, banks and the unions for a time bound turn around programme," C.H. Venkatachalam, General Secretary of AIBEA, told IANS on Sunday.

He said the government has said that the tripartite Memorandum of Understanding (MoU) is to commit all the three parties to specified and quantifiable milestones to be measured on quarterly basis.


Venkatachalam said the reason for signing the MoU is understandable and AIBEA is ready for it.


He said the central government has listed out five parameters under which the milestones would be fixed. 


These are: (a) active management of non-performing assets (NPA), strengthening of lending and monitoring processes; (b) arranging capital from the market; (c) plan for disposal of non-core assets; (d) divesting stakes in subsidiaries, closure of loss-making domestic and international branches; (e) reduction in operational expenses including employee benefits to would be reversed once the banks turns around.


According to Venkatachalam, the unions may be agreeable with all the conditions barring the raising of equity capital from the market as it would result in disinvestment.


"All the government-owned banks are making good operational profits. The net profit is low owing to provisions for bad loans. If only the bank management focus their energies on recoveries than all the government owned banks will be very much profitable," 

Venkatachalam said.