Presenting the Money-ratna package

November 8: After the Navratnas and Mini-ratnas, autonomy is being given to the Money-ratnas. Continuing its drive to provide packaged and ...

November 8: After the Navratnas and Mini-ratnas, autonomy is being given to the Money-ratnas. Continuing its drive to provide packaged and branded autonomy to different sections of the public sector, the Government has given conditional freedom to financially strong nationalised banks.

Depending on their financial strength and performance over the last few years, public sector banks will be allowed to take important decisions on their own. The chief executives of these banks will not be expected to run to the Finance Ministry or the Reserve Bank of India for permission to sneeze. While this is easier said than done, the package is an important if not a substantive, step forward.

Banks have been demanding operational freedom for a long while now. The package is aimed to meet these demands. Banks can now take decisions relating to recruiting personnel, drafting policies relating to administrative and personnel matters. They also have the authority to create posts below the level of general manager. The banks can also recruit its officers directly from the university and college campus.

Banks which have shown net profits for the last three years, which have minimum net worth of Rs 100 crore and whose non-performing assets are less than nine per cent will be eligible to become the money-ratnas.

This package was announced after a six-hour meeting of Finance Minister P. Chidambaram with chiefs of banks. In the meeting the banks demanded that they be exempted from unnecessary probe into bona-fide loans which have gone bad. They asked that probe should be conducted only if there was a prima-facie case of malafide intentions.

The money-ratna package was also the last important decision in which C. Rangarajan was involved before his tenure as the governor of Reserve Bank of India ended. He was at the helm of India’s fiscal and monetary policy reforms for close to six years.

His replacement Bimal Jalan comes from the Planning Commission. In his various posts in the Government and out of it, he has seen India’s economy from different positions.

Gale winds

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India’s assets turned into liability for the GAIL. As a result of the volatility in global markets, the $500-$700 million global depository ratio (GDR) issues was withdrawn by the Government, as it felt that its true price could not be realised from the investors. (A GDR is almost like floating a share on the international market, though equity conversion will take place after a while). With the price of Asian companies at an all-time low, it was felt that the investors would prefer to pick up the cheap shares instead of the GAIL GDRs.

The Government estimated that markets would be willing to pay only about Rs 100-120 per GDR, while the right price should have been between Rs 140-Rs 150. GAIL’s issue may be revived after January when the markets are expected to be better. But the deferment has hit the Government target of raising Rs 7,000 crore from disinvestment of public sector companies.The Government is yet to decide on the GDR issue of MTNL whose prices will be decided next month. Though analysts feel since MTNL is in the telecom sector whose stocks are generally in demand, its issue will get its due even in a not-so-buoyant market. As a result of the GAIL withdrawal, the share prices of the two PSUs dipped at the BSE. GAIL’s share fell to a 52-week low of Rs 117.50 but closed at Rs 123, up 25p from last close.