Banks to sign MoUs with government for recapitalisation

The Finance Ministry is firm on banks signing MoUs involving the government, banks management and employee unions for the ailing banks to avail the recapitalisation programme announced last month.

Earlier this year in March, the government recapitalised 10 PSBs based on the MoUs signed between the relevant parties. This procedure is quite mandatory, and the terms and conditions are also prepared by the Ministry.

In the March MoU, government, bank boards and employee organisations of 10 PSBs agreed for Rs8,586 crore recapitalization.

The terms of conditions of the MoU include strict asset management procedures and other commitments form the part of the capital availing banks. These include disciplines like active bad loan management using different mechanism available, mobilising capital from the open market, selling of non-core assets owned by the bank, a continuing plan for selling non-core assets, winding up of loss making branches etc. Another component of the MoU terms is that employee benefits should be temporarily postponed for saving operating costs.

Though management are ready with most of these suggestions contained in the MoUs, employees are resisting such moves. Unions are scheduled to meet soon to inform their opinion about the commitment under the MoU and the recapitalisation package.

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