Indian Bank seeks Rs 1,700 cr recapitalisation

The bank has proposed 45 years, or 20 years of service, as the cut-off period for offering VRS which will be primarily in the form of a golden handshake scheme.

Top officials of the bank, who have already met ministry of finance officials to discuss the rescue proposals, are understood to have received a favourable response. The top team included Ranjana Kumar, the chairperson-designate of the bank.

“The only condition likely to be imposed by the Centre is that the bank should turn around as soon as possible,” sources add. The team had impressed the Centre that the bank was making serious recovery efforts and would be in a position to make a turnaround by March 2002. In the meantime, the bank has recovered Rs 575 crore, including Rs 350 crore of cash as part of recovery exercises.

The Parekh committee, which looked exclusively into the bank’s problems, had suggested that it should liquidate all its holdings of real estate and disposable assets all over the country to gain some hard cash.

The government has completely ruled out a closure of the bank. Despite its weak financial position, the bank still enjoys phenomenal customer loyalty. Most customers have stayed with it.

The bank faced a major crisis of confidence when the CII proposed a closure of weak banks, including Indian Bank. This put the bank in a tight corner as non-resident Indians (NRI) began contemplating a withdrawal of their deposits from the bank.

However, the bank and the government successfully countered the CII report to reassure NRIs. The bank has two overseas operations in Singapore and Colombo. Both the branches are doing well and have contributed substantially to the bank’s bottomline.

The bank has opted for marginal lending activities on the basis of a special permission from the Reserve Bank of India despite having a negative capital adequacy ratio in recent times.