RBI scraps licence of ailing Madhavpura co-operative bank

MMCB custodian Radha Singh,a former IAS officer,was not available for comment but chief executive officer B K R Maruthy confirmed the development,saying he was awaiting further course of action to be taken by the apex bank.

The bank management under Singh,who would,according to sources,have little or no time to visit the bank’s office,could not rejuvenate its finances,exhausting all opportunities and options to save it from liquidation.

Back in 2001,it was only after the intervention from the then deputy prime minister L K Advani that the stringent RBI action was postponed and the bank was given a chance of revival.

Parekh who was arrested along with others was later granted bail on the condition that he would repay the money in installments but he deposited in the court Rs 72 crore only till 2005 via his 19 companies.

The MMCB had a negative networth of Rs 1,347 crore at the end of March 2011. According to market sources,the bank could recover only Rs three crore from defaulters so far. The bank needs to pay around Rs 100 crore to individual depositors and Rs 617 crore to 67 cooperative banks who had parked their money in MMCB.

Recently,the RBI had issued a showcause notice to MMCB asking it why its licence should not be cancelled.

“As of now,both individual and institutional depositors,which were largely other co-operative banks in the state,have already been provided for by Madhavpura to the tune of 52 per cent and 28 per cent of their total deposits,respectively. Now,there is no problem with co-operative banks in the state which had invested in MMCB,” says Jyotindra Mehta,chairman of Gujarat Urban Co-operative Banks Federation.

He said total deposits with co-operative banks in Gujarat stood at Rs 17,400 crore before the Madhavpura default setback,which reduced their total deposit to around Rs 14,000 crore in 2006. Banks have revived and as on March 31,2011,total deposits have increased to an all-time high of Rs 21,600 crore,which shows they are in good health today,he added.

Mehta said that with the cancellation of the licence,Parekh and other culprits would feel relieved and there would be no institutions to track their case.