Panel asks Govt to wind up 3 PSU banks

Panel asks Govt to wind up 3 PSU banks
PRESS TRUST OF INDIA

NEW DELHI, DEC 15: The Confederation of Indian Industry (CII) today asked the government to close down three `weak' public sector banks - Indian Bank, UCO Bank and United Bank of India - and privatise four others including the State Bank of India.

It was useless to keep these banks on artificial respiration, CII's national task force on non-performing assets (NPAs) said, adding shutting down of these banks with a severance package would cost Rs 9,800 crore to the exchequer.

The task force, headed by ICICI Managing Director K V Kamath has made wide-ranging recommendations to make banks and financial sectors manage their huge NPAs. Releasing the recommendations given to Finance Minister Yashwant Sinha on Monday, Kamath said, "eventually, nothing will work better than privatisation of banks and FIs."

Kamath said total cost to the government for shutting down these three banks with a generous severance package and no loss to depositors is about 7,500 crore. However, keeping in view the contingentliabilities of these banks amounting to Rs 4,637 crore, the task force estimated a higher cost at Rs 9,800 crore. This is after assuming that 50 per cent of the liabilities would actually materialise, the report said.

The task force said government must amend all the necessary acts to permit reduction of government stake in nationalised banks and financial institutions to below 25 per cent. In the first instance, the government must privatise State Bank of India, Bank of Baroda, Oriental Bank of Commerce and Corporation Bank.

These banks have low NPAs, earn good operating profits and enjoy extremely comfortable interest rate spreads, the report said, adding "when these major players are taken out of the ambit of the state, they will prosper."

The committee also recommended privatisation of FIs including IDBI, IFCI, SIDBI and Exim Bank. The report said the three weak public sector banks should not be bailed out through Asset Reconstruction Cos as they needed more radical solutions.