Story of scam-ridden co-op banks ends here

Founder chairman Mahendra Morabia, a chartered accountant, says they insulated themselves by playing by the rules and setting some unorthodox ones themselves. ‘‘Way before the scams came to light, we decided no loans for family members, relatives or friends of directors and other important functionaries.’’ Builders and stockbrokers aren’t extended any loans. And no politician can join the board of directors.

‘‘Builders are generally into speculation, which is risky. So when we raised loan limits to Rs 25 lakh in 1998, we decided there would be no loans for builders,’’ recalls Morabia.

Co-operative veteran Jairambhai Patel, who is chairman of the Gujarat State Co-operative Bank Ltd, says that such ground rules are crucial for increasing people’s trust. ‘‘Any co-operative bank which runs strictly according to RBI directives will never go bust,’’ he says. ‘‘Of course, directors will then have to follow these guidelines strictly and avoid manipulation. And ground rules of not investing heavily in one sector will always help.’’ Thousands of depositors from failed co-operative banks discovered it the hard way that it is most often directors and other senior officials who bring a good bank down.

‘‘As a chartered accountant, I studied the balance sheets of several co-operative banks,’’ recalls Morabia. ‘‘I realised the need for a bank which assures people the best and works on an independent finance policy that is not driven by directors or staffers. These were the ideas that drove us to register BMCB in April 1994 — we began business in May 1995, though.’’

Morabia points out the clear fixing of responsibility in his bank: ‘‘A loan is sanctioned only after the final recommendation of the chief executive officer — he is the one held responsible should a loan go bad.’’ While most other banks, too, ostensibly follow that system, at BMCB it is strictly adhered to — no bending to whims of directors or other senior staffers. Agrees Gopal Patel, a BMCB director: ‘‘A rule is a rule, it is acceptable to us all. We never recommend anybody’s name for a loan — just tell him to apply through the usual channel.’’ In fact, some time back a director had resigned when a loan he had recommended wasn’t cleared.

It helps that the bank has kept its operations small: BMCB has seven branches in Kutch district, and only recently opened one in Ahmedabad. Morabia says the bank wants to focus on service. ‘‘We now offer 24-hour banking, all days of the year. Computer systems at all branches are connected by optical fibre cable. We have a website offering online checking of passbook, checkbook etc.’’

‘‘People have lost trust in co-operative banks after the Madhavpura bank scam and the other scandals,’’ he says. ‘‘We are here to work to regain that trust.’’