Dr.

Ram Manohar Lohiya National Law University Lucknow

2017- 2018

Final Draft On

“Report Of Working Group (M.S. VERMA) On Restructuring Weak Public

Sector Banks”

Submitted to: Submitted by:

Dr. Aparna Singh Margaret Rose

Assistant Professor (Law) Section- A

RMLNLU Enrollment

Number- 150101078

Semester – Vth
 Introduction

THE Reserve Bank of India set up the Verma Committee to identify and examine the problems
of weak banks on the basis of certain criteria and to suggest a plan of restructuring. The
Committee submitted its report some time ago. The report has not been published but is available
on the Internet and is discussed widely. The panel identified Indian Bank, UCO Bank and United
Bank of India as weak banks, according to a range of criteria, and outlined a scheme by which
they could be bailed out through appropriate restructuring and government aid.

The report also identified eight banks in which the accumulated losses and net non-performing
assets exceeded the net worth of the bank. (Allahabad Bank, Indian Bank, Indian Overseas Bank,
Punjab and Sind Bank, State Banks of Indore, Mysore and Travancore, and United Bank of
India. It has identified three banks where operating profits less the income on recapitalization
bonds has been negative for the three years ending 1998-99 (Indian Bank, UCO Bank, United
Bank of India).

The panel went further than the Narsimhan Committee in introducing seven additional criteria
for examining solvency (capital adequacy ratio, coverage ratio), earning capacity (return on
assets, net interest margin) and profitability (ratios of, operating profits to average working
funds, cost to income and of staff cost to net interest income plus all other income).

In the good banks, the Committee argues, this ratio could be as high as the 8-12 per cent capital
adequacy measure. A negative coverage ratio or a declining coverage ratio would be a serious
source of weakness in banks. A coverage threshold ratio of 0.5 per cent of assets is the yardstick.

Research Methodology
This research is descriptive and analytical in nature. Secondary and Electronic resources have
been largely used to gather information about the topic. Websites, books, journals and articles
have been primarily helpful in giving this project a firm structure. Footnotes have been provided
wherever needed to acknowledge the source.
 Objective
 Overview of public sector banks and identification of weak banks.
 To identify the causes of weakness.
 Giving suggestions for restructuring the three weak banks

Tentative Chapterization

 Report of the working group

 Bank restructuring international experience
 Overview of public sector banks and identification of weak banks
 Past efforts of restructuring the three weak banks
 Suggestions for restructuring the three weak banks
 Conclusion

References
Books

 Tannan’s Banking Law And Practice In India- M L TANNAN

Websites

 https://www.thehindubusinessline.com/2000/01/01/stories/040120ju.htm
 http://www.yourarticlelibrary.com/banking/report-of-the-working-group-on-
restructuring-weak-public-sector-banks/26342