Search on for new co-op bank administrator

MUMBAI: A fortnight after chief minister Prithviraj Chavan appointed veteran bureaucrats Sudhirkumar Goyal and Sudhir Shrivastava as administrators on the NCP-controlled Maharashtra State Cooperative Bank (MSCB), a search has been launched for a new administrator as it was found that the duo was unable to devote time for management of the bank.  "Goyal and Shrivastava are able administrators, but they were unable to devote adequate time for management of the bank. Under such circumstances, it was felt that we should have new administrators, preferably a retired bureaucrat with a background of finance, planning or cooperation," a senior minister said. A week after their appointment as administrators, both informed the state government that in view of their prior assignments in Mantralaya, it may not be possible for them to attend the bank on a daily basis. "They have informed they will attend the bank only on Saturday. We felt that the presence of the administrator in the bank on a daily basis is essential," otherwise the entire administration will come to a grinding halt,"the minister said. Following a report by the National Bank for Agriculture and rural Development , the RBI on May 5 asked the state government to dissolve the entire board of directors and appoint administrators. Accordingly, the CM had dissolved the board and appointed Goyal and Shrivastava as administrators. Chavan's decision had sparked off a row in political circles, particularly in the NCP, which condemned the decision on the ground that it was taken in a hurry and without consulting the coalition partner. When asked if the appointment of administrators could be revoked, the minister said since action has been taken under the provisions of the Banking Regulation Act, there was no scope for the state government to make a review. "The only option is to challenge the decision before the HC, but we don't think that the bank will make such a move, since it will further widen the gap between the Congress and the NCP," he said.  The minister said no compromise formula has been reached between the Congress and the NCP, since the latter has taken the view that the 'law will take its own course'. "We are not knocking at the doors of the CM. Since Chavan has dissolved the bank on the advice of the RBI, it was for him to take a decision. Our view is clear, Chavan should have informed deputy CM Ajit Pawar before taking such a big decision," he said.

Students see RBI's functioning

KANPUR: Under its financial literacy programme, a group of students from a school in Cantt visited the Reserve Bank of India office here on 3^rd May 2011.   RBI Regional Director for UP and Uttarakhand Bazil Shaikh gave an overview of the functions of the bank. Other officials informed the students about currency management and foreign exchange management.  Students were apprised about Young Scholar Award Scheme and Summer Placement Scheme of RBI. Short films about the working of RBI were also shown to the students. The students had the opportunity to visit the exchange hall and see the exchange counters and coin vending machines.  The financial literacy campaign was organised by the RBI for different target groups like students, women, rural populace and senior citizens to give information about general banking and RBI.

RBI ups priority cap on housing loan

MUMBAI: The RBI on Friday raised the maximum limit of housing loans that will qualify as a priority sector loan from Rs 20 lakh to Rs 25 lakh. RBI said all loans sanctioned on April 1, 2011 or later will qualify under the enhanced limit.  Under the changed rules, loans up to Rs 25 lakh, irrespective of location, to individuals for purchase and construction of dwelling unit per family, excluding loans granted by banks to their own employees, will be eligible for classification under priority sector.

People mourn the death of 25 paise

NEW DELHI: The decision of the Reserve Bank of India (RBI) to do away with coins of 25 paise and less with effect from June 30 left many people dealing regularly in these denominations at a loss across the country.  Shop owners and street vendors in Patna expressed surprise on learning about the move on Thursday. "We need coins of small denominations because most medicines are not priced in round figures," said Ravi Sahu, a chemist on S P Verma Road. Street vendors, especially those dealing in items like betel, gutkha and beedis, also said they would be hit. "Many a time rickshaw-pullers come with Rs 1.25 and ask for five beedis. They want to utilize every paisa of their income. The decision will render their 25-paiseworthless," said Munnilal Sharma, a betel shop owner near Gandhi Maidan.  The RBI has asked the public to exchange these coins at the branches of banks maintaining small coin depots or at its own offices at face value.  Shyamlal, an aging rickshaw driver in Raipur, laughed when asked if he had any smaller coins. Athani Chawaani, bhikaari bhi nahi rakhte (even beggars don't keep 25 paise).  Once the banks collect all the old coins of 25 paise and less, the central bank is expected to melt them. The government would then decide what to do with the metal.  The move is likely to hit street children. "These children come with coins of 25 paise to buy lozenges. When 25-paise coins cease to be a legal tender, they will be saddened," said Mukesh Prasad, a roadside vendor near the Patna railway station.  Lawrence Babu, general secretary of the Kerala State Private Bus Operators Federation said there was scope for confusion as buses in the state still had 75 paise tickets for students. "After concession, students are charged only 12% of the normal fare. We have already demanded the government that this be raised to 50%. A report on fare revision is pending before the state government and we are awaiting action on it."  Director of the State Treasuries Department E K Prakash, however, said the move would have no impact on government transactions. "We already are under orders to round off the figures to the nearest denominator," he said.

New norms for top jobs in govt banks

NEW DELHI: Amid controversies over financial sector appointments , the government has issued revised norms for top jobs in public sector banks. While the norms for two-year residual service have been retained for appointment of bank chiefs, the government has decided to make an exemption only in case of a shortage of candidates . In such a scenario, the selection committee can look at candidates who have been executive directors for at least a year and have one year and nine months for retirement . The condition of one-year of service completed can also be halved but in both cases, an approval from the finance minister would be required, the guidelines issued last month said.  The move came as the government was facing criticism over selecting candidates who had less than two years to go for retirement. The norms also stipulate that only after a bank chief completes two years in a bank and has at least two years to go for retirement would he or she be considered for transfer to a larger bank or financial institution . In case of shortage, a three-month relaxation would be provided.  The guidelines said the selection committee should look at a pool of 15 candidates if it had to select 10 chairmen and if fewer candidates were left, then the norms could be relaxed. The other change that has been brought about is to widen the pool of applicants to include deputy managing directors of IDBI Bank and other financial institutions as also managing directors of State Bank of India associates, provided that were hired in the subsidiaries.  Further, from now on, the selection would only be valid for a financial year. If a candidate who has been selected to be appointed executive director or CMD of a public sector bank is not placed with a bank by March 31, he would have to go through the process once again, provided he or she is eligible. The cut-off date for determining eligibility has been fixed as April 1. In case of executive directors, the selection committee has been asked to keep the pool of candidates confined to general managers of nationalized banks and chief general managers of associate banks. The guidelines approved by the Appointments Committee of the Cabinet (ACC) has said that the subcommittee of the appointment board will consist of RBI deputy governor, secretary financial services and three external experts who will interact with the shortlisted candidates. The panel prepared by them will then be sent to ACC for approval. The guidelines have also provided the system for grading candidates.

Top executives of banks shower praise on Nitish

Patna, May 18 (PTI) Top executives of nationalised banks today praised Bihar Chief Minister Nitish Kumar for the 'massive' change in Bihar under him and asked their respective branches to give full attention to development in the state. "There is an atmosphere of development in Bihar ... We should think of and give attention as to how the investments take place," SBI Chairman Pratip Chaudhury said at the State Level Bankers' Committee (SLBC) meeting here. The experience gathered in other states would be utilised in Bihar, Chaudhury said adding "My concentration will be towards the atmosphere of investments." Special attention would be given to providing one branch for a population of 15000 in Bihar to put it on par with the national average, the bank executives. Central Bank of India CMD S Sridhar said there was a lot of potential in the rural sector, particularly in Bihar. "We have expanded our activities through North Bihar Kshetriya Gramin Bank even in the remote rural areas." It was also necessary to take serious steps for roping in the people with the banks, he said. Allahabad Bank CMD J P Dua said there was good atmosphere prevailing in Bihar for banking and investment."During the last five-six years there has been marked improvement in law and order, road structure and other basic infrastructure ... It is the best-ever time for more and more investments in Bihar." UCO Bank CMD Arun Kaul said there were new potentials seen in Bihar for promoting medium and small enterprises and therefore it was necessary that the banks introspect and consider afresh schemes to be launched in the state. RBI Regional Director M K Singh said the annual credit plan (ACP) target for the current fiscal fixed at Rs 45000 crore in Bihar was a major challenge and banks must review its functioning for financial inclusion of more and more people. He also laid stress on banks achieving the ACP target and providing loan to MSE. NABARD Executive Director Amlesh Kumar said banks should give more attention towards achieving Credit Deposit Ratio target during 2011-12 which could be fulfilled by way of provision of huge loans in agriculture sector. Secretary, Financial Services, Government of India, S K Sharma asked banks to achieve CDR in Bihar on par with the national average of 70 per cent from existing 34 per cent. "For this, the banks have to do a lot as the state has huge potentials in education, agriculture and uplift of the minorities, weaker sections of the society," he said. Chief Minister Nitish Kumar and Deputy Chief Minister S K Modi, also spoke at the meeting.

Unique number delay for lack of introducers

RANCHI: Though the Unique Identification Authority of India (UIDAI) has prioritized enrolling people who have no valid proof of their identity and worked out a mechanism called the "introducer based verification system", it came to light in camps organized in the state that there are few takers for this system. An authorized person with a valid UID number can introduce a person with no documentary evidence.  Commissioner NREGA, Ajay Kumar Singh, who has been entrusted with the task of enrollment of people, said the idea of the Aadhaar number based on introduction has not gained popularity. "There could be many reasons for this, introducers themselves may not have the Aadhaar number as is mandatory," he said, adding, "it could also be because the common man is not aware of the scheme."  According to rough estimates, 90-95 per cent Aadhaar numbers distributed till date have been based on identity proof. Officials at the regional office of UID in Ranchi looking after the states of Bihar, Jharkhand and West Bengal, said the UIDAI targeted including such people who have no documentary proof of their identity so that benefits of social welfare schemes could be extended to them. The UIDAI has offered to pay Rs 10 per introduction as an encouragement. The UIDAI in its guidelines under the introducer enrolment and monitoring process released in December 2010, had categorically mentioned that people's representatives should be enrolled first so that they can act as introducers. But this has not been followed. Ward councillor Rajesh Gupta said he once received a phone call asking him to arrange a camp for this purpose. He said he is waiting for summer vacation to begin in schools so that he can arrange a camp. "There has not been any special camp for potential introducers or ward councillors," he said.  Gupta added that had there been a separate camp for representatives of urban local bodies before camps for common people, the response of the people would have been much higher.

RBI hints at more steps as April inflation still high

MUMBAI: Reserve Bank governor Duvvuri Subbarao on Monday said April inflation at 8.66% was too high and stressed upon the central bank's resolve to batten it down to a comfortable level, indicating that he will continue with the hawkish monetary stance. Stating that inflation needs to be brought down to a comfortable level to maintain high growth, the governor said, "if you try to drive up growth by driving up inflation, what you will get left with is high inflation". The government data released on Monday showed a minor dip in headline inflation to 8.66% in April, driven by a moderation food and manufactured items prices.  However, the government revised upwards the March figure to 9%, which was provisionally reported at 8.98%.

Ghost From the Past Returns to Haunt SBI

Bank suffered similar profit shocks in the quarter after Janki Ballabh & OP Bhatt took over as chiefs !

After delivering shocking results for the quarter to March 2011, the State Bank of India Chairman Pratip Chaudhuri told the media on Tuesday that this was a quarter that the bank would like to forget. That is a sentiment which some of those who have headed India’s largest bank would have surely shared and for good reasons. Janki Ballabh, who succeeded GG Vaidya in November 2000 as the bank’s chairman, saw the net profit decline 45% in the very next quarter after taking over, only to show vastly improved set of numbers in the subsequent quarter. Om Prakash Bhatt, who steered SBI for five years until March this year, also followed the same script. The first quarter after he took charge as chairman in 2006, was marked by a 35% drop in profits, only to see a reversal of trend in the quarter that followed with a 45% growth in the bottom line. The perceived attempt in some of these cases, which also involve other state-run banks, is to boost the performance of the CEO of the bank shortly after taking over. For analysts who got the latest quarter results wrong, the numbers may have come as a big shock, but inside SBI, there were many who were anticipating this. But not the magnitude of the cleaning-up exercise. Mr Chaudhuri, who succeeded Mr Bhatt last month, sought to play it down saying it was just a coincidence that too many things such as provisions for bad loans, wage revisions and higher taxes were clubbed in a single quarter. “For the nine months,the bank has shown a 13% growth in earnings and in Q4 it has shown a 99% decline. What has happened in the fourth quarter to justify this performance? The only thing that is different and that is visible is the new chairman,” said Hemindra Hazari, head of equity research at Nirmal Bang Institutional Equities. Fingers are now being pointed at OP Bhatt for what some insiders in the bank say was an overtly aggressive drive to boost market share at the cost of the quality of assets.SBI did succeed on this front by taking on aggressive private banks, especially on home loans, even if it meant walking the thin line on regulations. Even when RBI sounded a warning to SBI to withdraw its teaser loans, Mr Bhatt did not relent, arguing that such loans benefited customers and could not be compared to the subprime loans in the US. Mr Chaudhuri’s predecessor could not be reached for comments despite several attempts. The face-off between the regulator and an unrelenting Bhatt led to RBI dropping by a notch the bank’s top rating which it assigns. This was done as the central bank said that the lender had not set aside enough funds against bad loans. By now going the full hog in provisioning or setting aside more funds for bad loans, SBI may gain a respite on the ratings front from RBI.  “This is a lesson to those banks who want to be aggressive in garnering market share, or overall visibility, because in their drive to achieve this, margins had to take a hit and bad debt provisioning deferred to show higher profit,” says Mr Hazari of Nirmal Bang Institutional Equities. In an earlier interview to ET, when asked whether the drive to gain market share could be at the cost of asset quality, Mr Bhatt had this to say: “Whenever a financial institution grows fast, the rate of NPA also grows. It is co-related. But even then, whenever a financial institution, in India and abroad, grows fast, it is a natural corollary that NPAs will also grow fast. Add to that the crisis to the economy. But with all that, our growth (in NPAs) was not the highest. There are banks whose NPA growth was more than ours compared to our asset growth.”

Brace yourself for double-digit inflation again

NEW DELHI: As if the sharp of petrol price by Rs 5/litre on Saturday was not enough, Monday brought the frightening prospect of double-digit inflation coming to your door soon, fuelled this time largely by a spike in manufactured goods.  There is already strong inflationary pressure in the economy and it is unlikely to come down soon as is evident from RBI's recent interest rate hike. On top of this, there is the impending increase in diesel prices, which is bound to send the prices of many goods and commodities upwards. A Rs 3 hike in diesel prices would add 25-30 basis points to inflation (100 basis points equals percentage point).  While inflation based on wholesale prices rose 8.66% in April, after being moderated from the upwardly revised 9.04% in March, wholesale prices data released by the government showed that the economy faces strong inflationary pressures. The government also revised the February inflation number to 9.54% from the previously reported 8.31%. "This suggests that latent inflationary pressures in the economy are strong. In view of such large revisions, the final March 2011 inflation figure (to be published next month) could well be close to 10% year-on-year," Barclays Capital said in a research note. The RBI had estimated inflation to be around 8% by end March but indications are that its projections would be missed by a wide margin. RBI has raised interest rate nine times since March 2010 to control price pressures and has said it is ready to sacrifice growth in the short term to tame inflation. Economists expect the RBI to raise rates again when it meets for its policy review.  Oil marketing firms on Saturday raised petrol prices by Rs 5 per litre which is expected to heap more pressure on household budgets. Milk producers have also raised prices and there is talk of an increase in diesel and cooking gas prices. All this will add to the pain of households.  "March itself can show double-digit inflation if the trend of upward revisions continue. Inflation is not going away any time soon. We expect the RBI to raise interest by 25 basis points in June and in August with upward bias and there could be another hike after that," said Samiran Chakraborty, economist at Standard Chartered Bank. Finance Minister Pranab Mukherjee said inflation in non-food articles is a continued source of concern. It remains elevated at over 27% in April 2011, he said, adding that he was not comfortable with the level of inflation despite "welcome signs" of moderation in April. The government also said the WPI new series had a programming error and the WPI for metal products was not getting incorporated in the index of basic metals, alloys and metal products and manufactured products. As a result of this correction, the rate of inflation for March, 2010 has increased from 8.98% announced earlier to 9.04% and the rate of inflation for April, 2011 without the correction would have been 8.53% as against 8.66%.

Meet Mumbai's agents of change

MUMBAI: The footpath opposite the Reserve Bank of India (RBI) is a good place to learn economics. Anyone in the vicinity of the RBI building can point you in the direction of a tree under which a bunch of "ladies log" sell coins of various denominations. They first get currency notes changed to coins at the RBI and other banks and then sell them to those in need of "chhutta paisa". They're among several traders who are part of Mumbai's unofficial "money market". With eateries and local kiranawallahs always short of change, many shopkeepers are willing to part with a small premium for coins in exchange for notes." While the RBI does not exactly encourage such transactions, the practice is not illegal," said RBI spokesperson Alpana Killawala.  One such trader, GB Gandhi, runs Mahavir Note Centre out of a tiny strip of floor space at the entrance of a building near CST. Each day, Gandhi travels from his Ulhasnagar home to his work station, consisting of a seat and a cash counter teeming with polythene bags carrying five rupee coins. Gandhi has now developed a network of contacts who visit the RBI and change currency notes to coins. He then buys coins from them at a 4% commission. So, if Gandhi gets a note of Rs 100 changed to coins, he pays the seller Rs 4. Gandhi then exchanges the loose change for notes at a 5% commission, making a profit of 1%. He says the trade, which he inherited from his father, is enough to earn him his daily bread. Both shopkeepers and money traders complain that most banks, including the RBI, don't give them the quantity of change they require. The price at which traders sell chhutta depends on the quantity that they are able to procure from the RBI. "When the RBI gives us more money in change, the rate at which we sell goes down," says Gandhi. Shopkeepers across the city complain of the acute shortage of loose change in Mumbai.  Ajit Singh, the owner of Sarovar Restaurant at Matunga, pegs this shortage to the mushrooming of ATMs spewing out high-value notes. He buys coins from a man called Pandit, who visits his eatery and gives him coins at a 12% commission. So for instance, if he wants to change a Rs 500 note for the equivalent in five rupee coins, he pays Pandit Rs 60 (Rs 12 per 100 rupees charged). Suren Mishra, the owner of Shri Mishra Dairy, another store in the vicinity, says that a man from Borivli visits his store and sells him change at the rate of Rs 15 per hundred rupees. But Killawala said, "We have put out millions of coins in circulation.  There is absolutely no shortage of coins," she said The RBI provides a large quantity of coins to various traders' associations, which, in turn, are supposed to distribute them amongst their members,'' she added.  It isn't just coins but low-value notes, too, that are bought and sold. In addition to buying coins at 12%, a Begali sweet shop in Matunga buys bundles of Rs 20 and Rs 50 notes. A bundle of Rs 50 notes worth Rs 5,000 can be bought for Rs 40 a bundle.

Sons of the soil shine in civil services exam

"Hard work, determination and persistent studies" was the mantra for success of Mohd Imran and Kumar Gautam, who have been ranked 169th and 388th in the civil services examination this year. A former college teacher Mohd Kaffiluddin's son, Imran is working with Reserve Bank of India as an Assistant Manager in Mumbai and cracked the UPSC exam in his maiden attempt. 

World Bank MD to take stock of city infra projects

MUMBAI: World Bank managing director Ngozi N Okonjo-Iweala will visit the city on Monday to look into the progress of bank-financed infrastructure projects. She will also meet chief minister Prithviraj Chavan and senior government officials. World Bank operations adviser, India, Hubert Nove-Josserand said Okonjo-Iweala will meet Reserve Bank of India governor Duvvuri Subbarao over breakfast.  Okonjo-Iweala's Mumbai visit will be at the end of her journey in India, which began on May 12. A Harvard graduate, she is a former finance minister of Nigeria and holds a Phd in economics from the Massachusetts Institute of Technology.  The World Bank is not pleased with the pace of work on the Mumbai Urban Transport Project (MUTP), which it is financing. It is fussing over extending the June deadline for the repayment of its current loan.

MSCB ignored RBI's directive to clean up act

MUMBAI: Mismanagement and abuse of power apart, the NCP-controlled Maharashtra State Cooperative Bank failed to implement RBI directions, the central bank has found. "In March 1996, the RBI issued directions to the MSC Bank, primarily asking it to improve its performance. But when the RBI undertook a review in March 2010, it was observed that the orders were not implemented properly," an official of the cooperation department told TOI. The RBI had asked the MSCB in 1996 to submit a quarterly compliance report to the National Bank for Agriculture and Rural Development. The MSCB, however, did not comply. "There was utter disregard. The RBI had no option but to dissolve the board of directors," the official said. Among other things, the central bank told the MSCB to withdraw the chairman's discretionary powers regarding sanction or withdrawal in excess of limits. "On record the discretionary power was withdrawn on November 8, 1997. But Nabard found that the chairman had allowed rollover of short-term loan to certain institutions without the approval of the loan committee," the official said. The central bank had also directed the MSCB to reduce the number of loan committee members to maximum 15 and ensure the committee's effective functioning. In response, the MSC Bank cut the membership, but never guaranteed the committee's effectiveness. As a result, loans were sanctioned to cooperative sugar factories and spinning mills having negative net worth. When Nabard submitted its report to the MSC Bank on February 24, 2011, the latter's CEO was asked to place the inspection report before the board of directors, prepare point-wise compliance report, place that before the directors and, finally, forward it to Nabard within 45 days. "Prima facie, it appears that the MSCB did not take Nabard seriously. It failed to submit the compliance report to Nabard within the stipulated period," the official said. Most shocking was the fact that while the bank's state was being discussed in the state legislature, the NCP was in the dark over the RBI's move to dissolve the board of directors and appoint administrators. The party came to know of the central bank's directive through the media.

RBI move to help reduce fake diamond export

SURAT: In what is seen as a step to curb the fake diamond exports and the round tripping of the funds and diamonds by the diamond merchants, the Reserve Bank of India (RBI) has reduced the term of letter of credit (L/C) from one year to just 90 days for the import of rough and polished diamonds. The Gems and Jewellery Export Promotion Council (GJEPC), apex body of the Indian diamond industry, has welcomed the step taken by the RBI. "It is a good step taken by the RBI. The reduction in the term of L/C will discourage fake diamond exports from the country and will help the genuine trade to prosper," said Sanjay Kothari, vice-chairman, GJEPC.
Kothari said there were elements in the diamond industry who were taking wrong benefits of interest arbitrage from the local and the foreign banks through the extended period of L/C. Official sources said the GJEPC had made several representations to the ministry of commerce and the RBI for reducing the L/C term in order to discourage the elements in the industry for taking undue benefits of availing cheap bank finance and interest arbitrage. Sources said the diamond importers open L/C with the local bank against fixed deposit as a guarantee to the supplier bank that his payment is secured. Once the foreign supplier's bank receives the L/C, it dispatches the goods to the importer's bank in India. For paying the overseas supplier, the importer takes a loan from a foreign bank, which at Libor plus 200 basis points works out 5.5-6 per cent cheaper than what is charged by a local bank. This loan is given to the importer against a guarantee from the local bank with which the trader has opened the L/C. Since the term of L/C has been reduced to 90 days, instead of one year, the diamond importers could not earn the benefit of interest arbitrage, which he used to get from the local bank till now by selling off his cut and polished diamonds at a certain value and earning 7-8 per cent interest on the fixed deposit.

MSC Bank was working without licence: Nabard

Mumbai: The NCP-controlled Maharashtra State Cooperative Bank (MSCB) was operating without a licence. Nabard, the cooperative and rural banking regulator, has stated the point in a 169-page report, based on which the RBI dismissed the MSCB board of directors a week ago. While the NCP has cried foul, saying the decision was politically motivated, the Nabard report has revealed one skeleton after another in the MSCB closet.  Nabard has observed that the MSCB board conducted its affairs against the interests of depositors, concealed non-performing assets, completely ignored the RBI’s statutory orders, sold the properties of borrowing units acquired under the Securitisation Act much below the reserve price, sanctioned non-agriculture loans without authorization from Nabard, waived huge interest amounts in violation of the Cooperative Societies Act and enhanced credit limits to units having negative net worth.

Diamond jubilee of RBI staff association in city

GUWAHATI: Reserve Bank Employees' Association, Guwahati, celebrated its diamond jubilee at district library auditorium of the city on Saturday. Inaugurating the programme, Meghalaya Governor Ranjit Sekhar Mooshahary has expressed his happiness over the gathering of RBI employees here. Celebrating the glorious service of 75 years for the nation, the workers of the central bank organized a seminar on foreign institutional investment in the Indian scenario. Resource persons like Alok Sen from Assam University and Nanigopla Mahanta from Gauhati University delivered their lectures on the topic. The association said other programmes were also held.

NCP banks ensure their money is safe

NAGPUR: The NCP, which holds sway at Maharashtra State Cooperative Bank (MSCB) perhaps knew what was in store for the bank. Even before NABARD submitted a report to the state government damning the bank, five district central cooperative banks (DCCBs) withdrew their deposits amounting to Rs 3,305 crore. The list included the Pune DCCB, known to be the forte of deputy chief minister as well as state's finance minister Ajit Pawar. The other banks are from Ahmadnagar, Sangli, Satara and Kolhapur. The management in all these banks is dominated by NCP leaders. DCCBs and urban cooperative banks normally park their funds to meet the statutory liquidity ratio (SLR) requirements and for other purposes. "There is no urgency of withdrawing SLR money in totality as done by these banks," say sources. It was on the basis of this NABARD report the RBI finally ordered the state government to sack the board of directors. However, by withdrawing the money, the five banks were already safe. Only a select few were privy to the report as well as the likely decision on the board of directors being superseded. Sources say the NCP got a whiff of the likely move and five of its key DCCBs withdrew the money parked here. They probably smelt a rat when inspection notices were issued to MSCB. "The report was submitted to the state government on March 8 but withdrawals were already made. Even today the report remains to be a confidential document and the sudden decision to withdraw the money in lumpsum certainly raise eyebrows," said BJP MLA from Southwest Nagpur Devendra Fadnavis. This matter came to the fore through a legislative assembly question (LAQ) raised by Fadnavis in which the withdrawal was confirmed. The government justified the move saying that the deposits had matured. Even as a majority of the DCCBs in the state have the NCP dominance, these five banks are considered to be premium institutions in Maharashtra's cooperative fabric. It seems that the banks knew that MSCB board would be sacked leading to a panic run by the individual depositors. Though these deposits constitute a small part of the total figure, a run can certainly lead to a larger cooperative crisis with the funds parked by the banks also under threat. "The management seems to have showed financial prudence by acting on the insider information they received," alleges Fadnavis.

RBI dissolves board of Pawar-run co-op bank

MUMBAI: A day after the Reserve Bank of India dissolved the NCP-controlled Rs 20,000 crore Maharashtra state cooperative bank board for dismal performance, the Congress and the NCP seem to be on a collision course.  Political analysts view the RBI's decision as a personal setback to agriculture minister Sharad Pawar and his nephew, deputy chief minister Ajit Pawar who were controlling the bank for over 15 years.  On the recommendation of the National Bank for Agriculture and Rural Development ( NABARD), the RBI asked the Maharashtra government to forthwith dissolve the board of directors and appoint bank administrator. Chavan on Saturday appointed agriculture secretary Sudhirkumar Goel and planning secretary Sudhir Srivastava as administrators. They have already taken charge. Sharad Pawar was also in Satara. He took strong objection over the way administrators were appointed. "There was no corruption in the bank, there were certain irregularities, which could have been rectified after discussion, there was no need for dissolving the board of directors and appoint administrators on the bank," Pawar said. The cooperative bank chairman Manikrao Patil, a senior NCP leader, called it unfortunate since the bank had taken several corrective steps to restore its financial situation.

Pawar irked at RBI's call on Maha state co-op bank

PUNE: Union Agriculture Minister  Sharad Pawar on Saturday expressed his displeasure over the Reserve Bank of India's decision to dissolve the board of directors of Maharashtra State Co-operative Bank Ltd (MSCB). Pawar said, "If an institution is performing well, it should be given some time to recover from the financial crisis."  Pawar was speaking at the 60th foundation day of city-based Pune People's Cooperative Bank Ltd.  The RBI on Friday evening dissolved the board of directors of the MSCB after finding deficiencies in the working of the bank. Dinesh Oulkar, temporarily holding the charge of cooperation commissioner and registrar, appointed Sudhir Kumar Goel, principal secretary (agriculture) and Sudhir Shrivastava, principal secretary (planning) as the members of the board of administrators on the MSC bank.  Pawar said, "There have been allegations that the bank has not recovered outstanding loans worth Rs 1,000 crore. The recovery was slow but happening. For many loans, the state government is the guarantor, which means the loans are recoverable, but the RBI authorities ignored it."  MSC bank, working as an apex bank for cooperative societies, sugar factories and other cooperative institutions in the state, has been a prominent political establishment. The bank, being a major source of funds for the cooperative establishments, has attracted political intervention in its functioning. There have been allegations against opposition parties as well as state leaders of Congress party for using the bank and network to make political gains.  Based on the audit report of 2009-10 and statutory inspection of the bank, conducted by the National Bank for Agriculture and Rural Development, the cooperation department found adverse features and irregularities and violations of guidelines and laws. According to the corporation department's finding, as on March 31, 2d010, the net worth of paid up capital and reserve was estimated at Rs 144.22 crore and capital adequacy ratio was estimated at -1.5% in the report. The non-performing assets were at 13.12%, the report stated.  Nabard's findings were also similar with the audit reports where progressive deterioration in the financial position was attributed to the sanctioning of loans without obtaining credit authorization for financing infrastructure projects. The letter has also claimed that some loans have been sanctioned contrary to recommendations made by the department.  The decision was taken on a requisition sent by V K Sharma, Executive Director of RBI by a letter composed on May 4.