Sick Surat co-op bank to merge with Rajasthan’s Adarsh bank

R R Padhyar,the bank’s administrator,said that further process was on to materialise the merger that should lead to survival of the bank from the spectre of liquidation. There has been some improvement in the bank’s financial position for the last six months after the RBI imposed restrictions under section 35(A) of the Banking (Regulation) Act,according to Padhyar.

Section 35(A) restrictions were first imposed in November 2010 and these have been extended for another six months now. He said the liquidity of the bank was around Rs 45 crore while the recovery of Rs 20 crore was effected in the past four months.

Prior to the imposition of the restriction,a special audit by the RBI in August 2010 had revealed poor liquidity conditions,violation of rules in disbursement of loans and irregularities in investments,which were found to be made through a broker instead of a government security dealer

Also,the then district registrar of cooperatives had stated that till March 31,2009,the total non-performing assets had accounted to 49 per cent,while 84.7 per cent CD ratio declared by the bank was also wrong and misleading. The bank had given loans of over 70 per cent of its total assets. And against that,it could recover only Rs 2.39 crore from 43 debtors.

These had led to the imposition of section 35(A) restrictions on which the Bank had obtained a stay order from the Gujarat High Court in the first week of November. By mid-November,the RBI got the HC stay reverted in the Supreme Court. The bank had 55,000 account holders and liquidity of Rs 34 crore six months ago.