Parliamentary panel to study bank mergers and recapitalisation schemes

The Subordinate Legislation Committee of the Parliament, which examines whether the rules and regulations drafted by executive is in tune with the Acts passed, has decided to study the merger of certain public sector banks and the bank recapitalisation schemes of the Centre. The Committee will see if the regulations and rules framed for both the purposes are in tandem with the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and the Nationalised Banks (Management and Miscellaneous Provisions) Scheme of 1970.

The matter came up for discussion on Wednesday when the panel was examining Regulations framed by UCO Bank, Indian Overseas Bank, Bank of Maharashtra and Bank of India under Section 19 of the Banking (Acquisition and Transfer of Undertakings) Act 1970. The members in the panel asked the representatives from the Department of Financial Services to furnish details of the merger and recapitalisation schemes, too, before the panel and before the Parliament.

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A member in the panel told

BusinessLine on the condition of anonymity that they asked the Centre about the status of the regulations framed by each of the banks mentioned in the agenda item under Section 19 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and asked the directors to lay all the regulations on the Table of the Lok Sabha. “We asked them about the reports that Niti Aayog has recommended some of these banks are up for sale. We did not get a proper answer. We have asked the officials to submit the details before our next meeting scheduled on July 12,” a member from the Opposition camp said.

Bank recap and NPAs

In the meeting, the members also sought whether UCO Bank, Indian Overseas Bank, Bank of Maharashtra and Bank of India have framed regulations prescribing the legal framework for ensuring the safety of computerised data by sub-section (2G) of Section 3 of the Act.

There were discussions about the recapitalisation schemes and non performing assets too. “We asked whether the procedure for raising the capital by the board of directors of each of the banks concerned as prescribed by Clause (c) of sub-section (2B) of Section 2 of the Act has been prescribed? If so, what are their salient features?" the member asked.

The members also observed that the Pension Fund Regulations of the banks do not make detailed provisions relating to functions of the trusts such as qualifications of trustees, procedure of decision making etc. The members asked the banks to provide inputs on the infirmities observed. The members also demanded the details of the capital structure of each of the banks concerned. “We asked whether capital is adequate to meet their liabilities? Whether the paid up capital of each of the respective banks has ever lost? If so, whether the same has ever been reduced?” the member said.

The member added that the mergers and the proposals to disinvest public sector banks go against the banking nationalisation scheme and it should not be done with the approval of Parliament.