The Hindu Business Line : Govt freezes operations of Ganesh Bank

THE Union Government has frozen the operations of Ganesh Bank of Kurundwad, Maharashtra, for three months as the bank's net worth has turned negative.

The Government has issued an Order of Moratorium on the bank based on an application of Reserve Bank of India. The moratorium would be effective from January 7 to April 6, said a release from RBI.

During this period, the bank will be permitted to make only those payments that have been specified in the Order of Moratorium. The depositors will be permitted to withdraw only up to Rs 5,000 from their savings bank or current account or any other deposit. Customers can withdraw this amount at any of the branches. The bank has 32 branches and its operations are concentrated in Sangli and Kolhapur in Maharashtra and Belgaum in Karnataka.

Ganesh Bank's net worth had fallen to a negative Rs 3.05 crore, thereby taking its capital to risk adjusted ratio to a negative 5.83 per cent as on March 31, 2005. This resulted in the erosion of depositors' money. The bank was also unable to come up with any credible plan to raise fresh capital, RBIsaid

During the period of the moratorium, RBI will consider various options, including the amalgamation of Ganesh Bank of Kurundwad with any other bank, and finalise plans to protect the public deposits.