The Hindu Business Line : Madhavpura revival crucial for co-ops

A file picture of account holders reading the notice put up by the management of Madhavpura Mercantile Co-operative Bank after it closed down its branch in Mumbai in March 2001 in the wake of the Ketan Parekh scam. - - Paul Noronha

Ahmedabad , July 26

THE Madhavpura Mercantile Co-operative Bank (MMCB) spectre has risen once again to haunt the hapless co-operative banks whose aggregate deposits with it stand at Rs 635 crore.

The State co-operative banking sector is set to witness turbulent days once again as a recent Reserve Bank of India (RBI) directive stands to write off this entire amount as non performing assets (NPAs) with effect from March 31, 2005.

The co-operative banks, given time till July 31 to submit particulars of their deposits with the MMCB, are up against the wall as they had been working in tandem with the State Government on revival plan for the MMCB. Some 60-odd State co-operative banks are now hard pressed to explain this new development to their investors.

The fact that the RBI specifically cited the tardy progress of the MMCB restructuring programme as a reason for treating their deposits with the Ketan Parikh scam-tainted bank as NPAs has set alarm bells ringing among the lakhs of investors in this sector.

This comes even as the MMCB revival plan of the Gujarat Government, where the State co-operative banks were called upon to pool in Rs 800 crore, hangs fire.

The MMCB revival plan is still under consideration with the Central Registrar of Co-operatives and the last date to take a decision one way or the other is August 24.

Talking to Business Line, Mr Jairambhai Patel, Chairman of both MMCB and the apex Gujarat State Co-operative Bank (GSCB), said some 80-odd co-operative banks in the State had already collected Rs 326 crore towards this. While 70 per cent have been deposited with the RBI, the remaining 30 per were with the GSCB, he said.

"The MMCB has been quite regular in paying the interest on Rs 635 crore that it still owes the State co-operative banks. The RBI has been grossly unfair as the recent directive sends a negative signal on the financial strength of MMCB and will negatively impact scores of other co-operative banks. I do not understand the hurry as there is only one month to go for clearing the MMCB revival package", Mr Patel said.

Meanwhile, the State Registrar of Co-operative Societies, Mr J.P. Gupta, has rushed to meet RBI officials at Mumbai on Monday in a bid to control the damage that had already been wreaked by the RBI directive.

The State Government is understood to be trying to get the RBI brass to issue a rejoinder to the earlier notice.

The effort is now to give out the general impression that the RBI notice entitled `Deposits with MMCB - assessment of impact of provisioning for capital adequacy' does not in any way stop these banks from getting back their dues from the MMCB.

Senior officials of the State Government fear that given the fragile investor confidence following the Global Trust Bank (GTB) imbroglio, the RBI directive could be misconstrued.