Ever since the economic reforms have begun in India in early ‘90s, the banking sector in India has made a tremendous progress and has come a long way since then. Unarguably, banks are the most important part of a country’s financial system. In India, till ’90s the banking sector was dominated by public sector and with the emergence of new sets of norms in the post-’90s, the PSU banks found it hard to cope with the dynamic industry changes. This posed a serious threat to the public sector banks. Some banks even turned negative. To give a helping hand to the loss-making PSU banks, Government of India appointed a Working Group under M S Varma, to help the public sector banks to transform them into profit-making. It is exactly five years since the report was submitted and it seems the objective of the committee was well served as all the three loss-making banks turned positive. The present paper is a study on those three loss-making banks performance in the last five years (post restructuring period) and also the paper emphasizes on the strategies adopted by each of these three banks in the process of restructuring.

Ever since the massive program of bank nationalization was launched by the Government of India in late í60s and early í80s, public sector banks held a combined market share of over 95% till í90s. The early í90s saw a metamorphosis in banking industry, as Government of India opened up the sector for private and foreign players. Soon, the new private and foreign banks started to pose a serious threat to all the public sector banks with their much superior quality services. Added to the above, Government of India introduceda new set of norms, viz., prudential norms1, Capital Adequacy, Income Recognition, Asset Classification and provisioning norms to be followed by all the commercial banks in India. The public sector banks found it difficult to cope with these new norms as 12 out of 27 public sector banks posted losses in the very first year of its implementation. In mid-í90s, Indian Bank2, UCO Bank3 and United Bank of India4 posted an industry loss of over 680 cr in the year 1996-97 and later, these three banks were labeled as the weakest public sector banks in India.