GSSIC closure a blow for co-op banks

GANDHINAGAR, NOV 15: As many as 40 co-operative banks of the state face the prospect of losing about Rs 30 crore they had invested in the...

GANDHINAGAR, NOV 15: As many as 40 co-operative banks of the state face the prospect of losing about Rs 30 crore they had invested in the non-convertible bonds issued by the government-owned Gujarat State Small-scale Industries Corporation (GSSIC), which is being wound up.

The government’s recent decision to close down the loss-making GSSIC has reportedly created panic among those managing the banks’ affairs, forcing them to make a strong representation to the government to ensure that the amount invested in the bonds is returned.

But Principal Secretary (Finance) K V Bhanujan told The Indian Express

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, “The Government can’t afford to extend financial assistance to any of its loss-making corporations. In fact, the government has already initiated a process of closing down the GSSIC by offering the voluntary retirement scheme (VRS) to its employees. The corporation has incurred losses of about Rs 70 crore”.

On the fate of the banks’ money stuck in the corporation’s non-convertible bonds, Bhanujan only said, “I can’t comment further on the issue as the matter is sub-judice, with the co-operative banks having already approached the court in this regard”.

In their desperate bid to get back their money, the managements of the aggrieved banks have formed an organisation called “Sahakar Bharati” to fight their case. Representatives of this newly formed body held a series of meetings with Finance Minister Vajubhai Vala and other ministers and senior officials, but the meetings have not yielded any positive results so far.

Sources said the 40 banks, located in different parts of the State, had invested about Rs 30 crore in the GSSIC’s bonds in December 1997. They realised that their investment was in jeopardy only when the corporation expressed its inability to pay them interest. As the bonds matured on June 30, 1999, the banks sent in their bond certificates to the GSSIC, seeking the payment of the amount, but to no avail.

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“The government had permitted banks to invest money in its boards and corporations under section 71 of the Co-operation Act. This prompted us to invest in the GSSIC. If our money is not safe in government-run bodies like the GSSIC, we will have to think twice before investing in public sector ventures in future,” said a representative of the aggrieved co-operative banks.

Among the banks whose money is stuck in the GSSIC are Surendranagar People’s Co-operative Bank and Ahmedabad Mercantile Bank (both having invested Rs 3 crore each), Anand Mercantile Bank, Progressive Mercantile Bank of Ahmedabad and Diamond Jubilee Bank of Surat (each having invested Rs two crore). The amount invested in the corporation by the rest of the banks ranges between Rs 10 lakh to Rs 1.70 crore.