RBI, RoCS pass buck in co-operative bank fiasco

But in its admission before the high court, the RoCS — a state government body — passed the buck back to RBI. ‘‘As far as the cooperative banks are concerned, their functional supervision is exclusively vested with the banking regulator.

In essence, the co-operative banks are carrying out the banking business as they are under the direct control of RBI,’’ the RoCS said.

The South Indian Bank collapsed in August in 2004 which resulted in thousands of its small depositors running from pillar to post to get access to their deposits. In just one year, the bank’s non-performing assets shot up to 51 per cent of its deposits at Rs 66.94 crore. It had a deposit of Rs 229 crore, of which almost 22 crore were lent to one group Kamal group which defaulted in repayments, according to RBI.

The central bank admitted that it issued broad guidelines to the business relating to banking and monitored compliance by the co-op banks of the various regulatory instructions issues by it and statutory provisions. ‘‘The functional and administrational aspects of a cooperative bank vests with the state government and RoCS,’’ it added.

RBI said it conducted its audits only once in two years and in the interim period it took into consideration the reports published by RoCS.

The registrar has powers to take action against a cooperative society of supersession of the board of directors under Section 78 of the Maharashtra Cooperative Society Act or actions under Section 83 investigating into the working of the societies, RoCS said. ‘‘However, in respect of co-operative banks, the action of supersession of such banks can only be done with the sanction of RBI,’’ it added.

While the central bank has said it has recommended to RoCS to take action against the bank’s directors who were responsible for creating bad debts, RoCS has made no mention of any action taken to the court.

RoCS, however, added that as RBI was vested with necessary powers to take appropriate action under the Banking Regulation Act for regulating the conduct of affairs of the bank, it should take necessary steps for revival and recuperation of South Indian Bank.

The Bombay High Court is expected to hear the petition on Wednesday.