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Pratibha bank waived loans for kin before RBI shut it down

The cooperative bank in Jalgaon set up by the UPA-Left’s Presidential nominee Pratibha Patil, ostensibly to empower women, had its licence revoked in 2003 by the Reserve Bank...

Written by With Dhaval Kulkarni | New Delhi |
June 25, 2007 3:30:57 am

The cooperative bank in Jalgaon set up by the UPA-Left’s Presidential nominee Pratibha Patil, ostensibly to empower women, had its licence revoked in 2003 by the Reserve Bank of India (RBI) for alleged financial irregularities.

Confidential inspection reports of the RBI as well as correspondence exchanged between the Finance Ministry and the RBI, available with The Indian Express, reveal that the Pratibha Mahila Sahakari Bank, which Patil founded in 1973, faced several allegations.

Among the lengthy grounds listed by the RBI for cancellation of the license was the faulty loan policy of the bank and loan interest waivers given, among others, to Pratibha Patil’s relatives.

According to complaints sent by the Bank’s union leaders, as many as a dozen of Patil’s relatives were granted loans (totalling Rs 2.2 crore including penalties, most declared Non Performing Account holders) by the cooperative bank.

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The list of relatives who received loans from the cooperative bank meant for improving the plight of the people of Jalgaon, and women in particular, include her brothers and nephews.

Another list of relatives got a waiver of penal interest and charging interest (totalling Rs 41 lakh) and were allowed to close their accounts prior to the bank’s liquidation.

When The Indian Express sought his comments, Dilipsingh Patil, Pratibha’s elder brother, who pointed out that it was not possible for his son to take loans from a bank run for and controlled by women, admitted that he too had taken loans from the bank.


“The bank had 8,000 to 10,000 members, all of them women, who also took loans. In such a case, how is it possible to say that the bank went into losses just because Pratibhatai’s family members took loans?” he said.

Pratibha Patil was the founding chairperson of the Bank and later, along with a number of her relatives, was one of its Directors. She is currently one of the 34 respondents in an ongoing case in the Aurangabad bench of the Bombay High Court on the subject of mismanagement of the bank and misappropriation of funds by its Managing Directors.

Evidently, it was after receiving a sheaf of complaints from the Cooperative Bank Employees Union and its small depositors that the Finance Ministry (in a letter dated April 26, 2002) asked the RBI to inquire into allegations of irregularities.


In its 28-page inspection report, the RBI noted that the bank had been declared “weak” since 1995 and after the 2002 inspection was being classified as “sick.” The report noted:

The real or exchangeable value of the bank’s paid-up share capital and reserves stands at minus Rs 197.67 lakh. Thus, the bank is not having adequate assets to meet its liabilities. The bank does not comply with the RBI’s requirement of minimum share capital.

The ratio of the net erosion to net owned funds of the bank is as high as 312.4% and the erosion in the value of the bank’s assets has not only wiped out its owned funds but has also affected the deposits to the extent of Rs 197.67 lakh, forming 26% of total deposits.

The gross NPAs of the bank, that is loans that have gone bad, amount to 65.8% of the total loans and advances.

The Board has not made any concerted effort to improve the bank’s financial position and bring it out of the weak status.


Thus, in an order dated February 25, 2003, the RBI’s Executive Director P B Mathur signed a license revocation order in which he stated: “Having regard to all the facts, the Reserve Bank of India is satisfied that allowing the bank to carry on banking business any further would be detrimental to the interest of the present and future depositors and hence the license granted to the Pratibha Mahila Sahakari Bank Ltd is hereby cancelled.”

“The RBI is of the view that no purpose will be served by granting any further time to the bank to revive its position. Public interest would be adversely affected if the bank is allowed to carry on its business further,” the RBI report said.


The RBI’s inspection report was highly critical of the bank’s loan granting policy without proper securities (“the bank had no loan policy” the credit appraisal system of the bank contained many deficiencies”) and also took up the issue of waiver of interest on NPA loans to Pratibha Patil’s relatives in a separate section titled “complaints and frauds”.

The RBI listed the waiver of loans to two of Patil’s nieces and her sister-in-law and noted, “it was observed that the above accounts were closed by the bank by waiving the penal interest and charging interest @ 13%. The bank had not taken approval of the members in the Annual General Meeting.”

These waivers were given to:


Anjali Dilipsingh Patil (Pratibha Patil’s niece), who got a waiver of Rs. 29.86 lakh

Kavita Aravind Patil (sister-in-law of Pratibha Patil), who got a waiver of Rs. 8.59 lakh; and

Rajkaur Dilipsingh Patil (another sister-in-law of Pratibha Patil), who got a waiver of Rs. 2.47 lakh.

The writ petition filed by the banks’ depositors in the High Court makes serious and more direct allegations against the founder chairperson.

It states, “Pratibha Patil is the founder member of the bank who is a politically influential personality. She has made all her relatives as Directors of the bank and the bank is being run as good as a family business. Because of the influence of respondent no 8 (Prathiba Patil) the bank has given various loans to the relatives and to a sugar factory of which she is a Director. Her relatives have not paid back the loans. Most of the loans were given without security. Most of the loans are closed.”

Vijay Kumar Kakade, former president of Pratibha Sahakari Bank Karmachari Sangh, told The Indian Express that with the cancellation of its licence and commencement of liquidation process, the bank was closed and people lost their jobs. “Pratibha Patil was responsible for this. There is no personal enmity with Patil madam, but we want to tell our countrymen that such a person is going to occupy the highest office.”

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First published on: 25-06-2007 at 03:30:57 am

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