Money & Banking

MSC Bank board to be elected after setting the house in order

| | Updated on: May 29, 2011

The process of fixing responsibility on the former directors of the bank has begun but it is a very slow process and requires political will.

The administrators of the beleaguered Maharashtra State Cooperative Bank (MSC Bank) are expected to bring some order in its functioning over the next 12-18 months. Thereafter, elections would be held for appointing the new board, a senior official of the State Government said.

On May 7, the 44-member Bank's board was suspended by the Maharashtra Government on the Reserve Bank of India's directive. The RBI order was based on the National Bank for Agriculture and Rural Development's (Nabard) annual inspection report which had found a negative networth of Rs 144 crore, high level of bad assets and a high exposure to sugar co-operatives mills (42 per cent of total loans) in the bank.

The official said that the process of fixing responsibility on the former directors of the bank has begun but it is a very slow process and requires political will.

“Responsibility under the Cooperatives Act can be fixed. But it is a political decision which requires green signal from the highest power centres in the country,” the official said. The board members, against whom fingers have been raised, have decided not to approach the courts for a stay on the appointment of administrators as they fear that it might boomerang on them and the courts could even pass strictures, the official said.

The Leader of the Opposition in the Legislative Assembly, Mr Eknath Khadse, told Business Line that in other cooperative banks where financial mismanagement had taken place, the State Government's action has been quick but in this case it is dragging its feet for obvious reasons.

“Other banks have faced action based on audit reports but here there has been no action, in spite of Nabard's report,” Mr Khadse said.

He added that recently he was informed by Mr Harshwardhan Patil, State Minister for Cooperation, that soon a Section 88 notice, under the Maharashtra Cooperative Act would be issued against the former board members.

The notice deals with fixing accountability for the actions taken by the board members.

Published on May 29, 2011

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