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Radhika Menon

`Claim list' not submitted by liquidators; nearly Rs 400 cr stuck with banks

Mumbai March 27 For depositors of several co-operative banks that have been liquidated, the wait for return of their deposits seems an indefinite one.

Although the Deposit Insurance and Credit Guarantee Corporation (DICGC) provides a cover of up to Rs 1 lakh for every depositor of a bank that is being liquidated, the depositors have not received any relief yet. This is because the liquidators have not provided the insurer the required details, said a DICGC official.

The total deposits stuck with these cooperative banks are estimated at Rs 400 crore.

Claims worth several crores of rupees have been pending, some for as long as 14 years. But, DICGC is unable to process them, said the official.

"The major reason for pending claims is that the `claim-list' has not been submitted by the liquidator. The other reason is that a case might have been filed by a borrower or the bank management and the liquidation has been stayed," said the DICGC official.

Claims in respect of at least 50 banks that had gone bust since 1993 are pending, he said. Of the 50 banks with pending claims, 11 are in Karnataka, followed by Uttar Pradesh (8), Andhra Pradesh (6) and the North-East (6).

Co-operative banks are governed by the State Co-operative Societies Act and, when their license is cancelled by the RBI, the Registrar of Co-operative Societies appoints the liquidator.

Sources say that the claim-lists are not submitted because very often the liquidator (a State Government official) may not be competent to audit and prepare balance sheets, leading to delays.

In the case of some of the banks, prolonged litigation has come in the way of settling claims.

Bad loans

According to analysts, concentration of bad loans in high-risk areas has brought the downfall of a number of co-operative banks in the country. In 2005-06, DICGC made a provision of Rs 1,260 crore for depositors of 117 liquidated banks.

DICGC has now suggested that the audit and other liquidation related work be outsourced to Chartered Accountants.

In the event of court cases, the corporation is seeking an irrevocable undertaking from the Registrars of Co-operative Societies to repay depositors' claims to DICGC.

If there is a court restraint disallowing DICGC from settling claims even after the claims list is submitted, the corporation plans to make an application to the court to have the injunction lifted.

The corporation also plans to issue advertisements in local newspapers to make depositors aware of the issue. As of now, the DICGC official said the corporation has received claim-lists from over 10 banks.

In 2005-06, DICGC collected premium of Rs 1,784 crore from commercial banks, against Rs 1,211 crore in the previous year, Rs 189 core (Rs 142.94 crore) from co-operative banks. The corporation has settled aggregate claims of Rs 565.16 crore with respect to 43 co-operative banks in 2005-06.

More Stories on : Investor Protection | Co-operatives | Fixed Deposits

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