Local politicians in the Bengaluru South region and officials of a small co-operative bank — on which curbs in withdrawals have been placed by the RBI for six months on account of a steep climb in non-performing assets — have assured the bank’s nearly 9,000 customers that their deposits will be protected and returned by end of the 2019-20 fiscal year.
Over the last couple of days, panic has gripped depositors in the co-operative Guru Raghavendra Sahakara Bank Niyamitha, most of whom are senior citizens, following a January 2 order of the RBI restricting withdrawals from the bank to Rs 35,000 for six months from January 10.
According to the RBI’s order, signed by Executive Director Rabi N Mishra, the curbs were being imposed “in the interest of the public”.
The bank has also been barred from granting or renewing loans, making investments, borrowing funds, accepting fresh deposits or selling assets without clearances.
The restrictions led to a large number of depositors gathering for meetings with bank officials over the last two days to obtain clarity on the situation.
The RBI has imposed curbs because the bank has seen some Rs 350 crore in NPAs accruing from 62 borrowers over the current financial year, Chief Advisor of the bank M V Maiya said on Tuesday.
“My livelihood depends on the interest from the bank. They said that from next month the interest will not be available. How can I manage as a senior citizen? Why did he RBI not act on time?” an elderly citizen said at the bank.
“Most of the depositors are senior citizens. How are we going to manage if the funds are locked? How was dividend of 15 per cent allowed to be paid by the RBI if the bank is facing a fund crunch?” asked another depositor.
Some of the depositors said they were reassured by statements of bank officials and local politicians regarding protection of their deposits.
“Last 20 years there has been no black mark on the bank. There is a conspiracy against us. We have clarified matters to (Finance Minister) Nirmala Sitharaman and Tejasvi Surya (local BJP MP). We would have run away if we could not face the situation,” former CEO M V Maiya said.
“I assure you that by 31/3/2020 all dues will be cleared and every paisa returned. We have loans of Rs 1,700 crore and assets of Rs 2,200 crore. We have deposits in other banks also. During the course of inspection, the RBI appreciated the fact that we have collected security of Rs 1,020 crore. All 62 borrowers have given acknowledgements of their debt, fresh documents and fresh security. There is nothing to worry,” the chief advisor said.
“In the last nine months we have not been able to concentrate on some NPA accounts… They gave us 42 days to clear up the NPA but suddenly on Friday they issued this circular and we do not know the reason behind it,” Maiya said, claiming a conspiracy involving a rival group in the bank ahead of election of directors on January 26.
“The financial health of co-operative banks in Karnataka are sound. The RBI has issued some directions to reduce the NPA and efforts will be made to restore normal functioning at the bank at the earliest officials have said,” the JDS leader Ramesh Babu said in a statement.
“The honorable FM after speaking to the RBI governor and other authorities concerned assured Mr Surya (the BJP MP) that the government will do everything in its capacity to protect the interest of the depositors and the long term interests of the bank,” a statement from Tejasvi Surya said.
According to a financial statement put out by the co-operative bank, its loans and advances grew from Rs 30 crore in 2008 to Rs 1,150 crore in 2018, while deposits grew from Rs 36 crore to Rs 1,565 crore during the period. The number of members of the co-operative increased from 4,251 to 8,614 during this period in the bank, which was started in 1997 and now operates with eight branches.