Scam-hit Madhavpura Mercantile Co-op Bank’s fate hangs in balance

Ahmedabad Uncertainty looms over the future of scam-hit Madhavpura Mercantile Cooperative Bank (MMCB) Ltd as the term of its existing board of directors is ending on August 23. Much will depend on the stand to be taken by the central government over the suggestions for corporate debt restructuring made by bankers for its revival. A delegation of banking industry had met Union Agriculture Secretary P K Basu and other officials in New Delhi last week to suggest ways for the revival the Bank and give it yet another chance to avoid cancellation of banking licence.  Jyotindra Mehta, chairman of Gujarat Urban Cooperative Banks Federation (GUCBF), who was part of the delegation, is hopeful of the suggestions being accepted. He has said that dissolution or cancellation of the banking licence at this juncture will not help either the Bank or serve interests of its depositors. “On the contrary, it will only help the culprits responsible for its liquidity crisis,” Mehta said on Sunday.  “The Central Registrar of Cooperatives has no power in this case either to discontinue or revive the present board. Only the Reserve Bank of India can take a decision on whether to appoint an administrator or extend term of the present board of directors or let its licence be cancelled,” he said. He said that as part of the revival strategy, those urban cooperative banks which have their money stuck in MMCB have offered to forgo half of the amount the Bank owes to them, which he said would be a considerable sacrifice to help reduce the liabilities substantially. “Similarly, the 13,000 depositors have also offered to waive their claim on 35 per cent of their deposits if it leads to continuance of the bank in business,” Mehta said. Another way to keep the Bank afloat is to convert depositors money into equity and thus maintain liquidity levels and keep its net worth on higher side, he said adding, he was hopeful that the officials would agree to the debt restructuring plan submitted to them. He admitted that curiously, neither the Central Registrar of Cooperatives or the Bank’s current chairperson were present at the last week’s meeting. MMCB chief executive officer B K R Maruthy refused to comment. The depositors had a run on the Bank in March 2001 following unearthing of a scam committed by leading BSE share broker Ketan Parekh, which led the Bank to severe liquidity crunch and removal of the then board of directors.

IE