Suspended directors of co-op banks to be barred from board elections

The board was disbanded in 2011 after directions from the RBI for being mired in losses to the tune of Rs 1,100 crore.

Written by MANASI PHADKE | Mumbai | Published: January 6, 2016 4:31:57 am

In what would be a blow to several politicians, especially from the Congress and the Nationalist Congress Party (NCP), the Bharatiya Janata Party (BJP)-led government on Tuesday decided to bar directors of mismanaged district cooperative banks from standing for re-election.

The decision will apply to all banks whose board of directors has been dissolved as per the Reserve Bank of India’s (RBI) directions and are facing inquiry for mismanagement of funds and illegal transactions. The dismissed directors will be ineligible to contest elections as a director not just in the concerned bank but in any other bank in the state for a total two terms.

The state cabinet approved an ordinance to amend the Maharashtra Cooperative Societies Act, 1960, to implement this decision. The file will now be sent to the Governor for final approval.

A senior state government official, who did not wish to be named, said, “We observed that after a board of a district cooperative bank was dissolved, followed by an inquiry, the same directors would once again get re-elected, and there was no real change in situation. There have also been complaints about impact on recovery because of the presence of these directors, and any court inquiries are not followed up regularly. This weakens the bank further.”

He added that district co-operative banks, which play a crucial role in financing of the agriculture sector, have become completely politicized, with recruitment, loans and other decisions completely controlled of a handful of politicians.

“This decision will help clean up the sector at a time when the state has been facing a major agrarian crisis,” the official said.

As per procedure, the RBI first gives an initial report to the errant district co-operative bank, giving time to the bank to set its affairs in order. If there is no improvement even after that, the RBI, under the Banking Regulation Act, gives directions to the district co-operative bank to implement certain measures of improvement. If it still fails to bring about a difference, a proposal for disbanding the board is then sent to the Cooperation Commissioner’s office.

The health of the district central cooperative banks in Maharashtra is currently very bleak, with 20 of the 31 banks reporting non-performing assets of more than 10 percent.

A majority of these banks are controlled by Congress and NCP leaders. Senior Congress and NCP leaders such as Ashok Chavan, Radha Krishna Vikhe Patil, Patangrao Kadam, and NCP’s Ajit Pawar, Vijaysinh Mohite Patil, Dilip Walse Patil have been actively involved in politics of the district cooperative banks. Interestingly, Pandurang Phundkar from the BJP and Shiv Sena’s Anandrao Adsul, who were on the board of the Maharashtra State Cooperative Bank with several other Congress and NCP leaders, including Pawar, may also be barred from contesting cooperative elections.

The board was disbanded in 2011 after directions from the RBI for being mired in losses to the tune of Rs 1,100 crore.

Senior cabinet minister Eknath Khadse, the only BJP minister to have interests in the district cooperative banks sector, was incidentally not present at Tuesday’s Cabinet meeting. Opposition party members criticized the move, saying it is purely political and aimed at weakening the Congress and NCP in the state.

A senior Congress leader said requesting anonymity, “It is a huge political death. Co-operative banks and the co-operative system has traditionally been a huge source of strength and finances for several Congress and NCP politicians. Instead of prohibiting all directors, the government must identify corrupt directors, prove the charges and then even take criminal action against them.”

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