No RBI licence for 11 co-op banks in state

As many as 11 cooperative banks, including the Maharashtra State Cooperative Bank, in the state are functioning without a licence from the Reserve Bank of India. Similarly, 11 banks do not comply with Section 11 of the Banking Regulation Act. One bank in Western Maharashtra controlled by an NCP leader is facing a probe into an estimated Rs 100-crore fraud.  These facts had emerged after the board of directors of the MSCB was dissolved and an administrator appointed by the RBI. NABARD officials said MSCB was one of the banks that was not qualified to receive the RBI licence as its performance was not satisfactory. "For a bank to receive RBI licence, it has to have a satisfactory performance. This means the bank was unable to maintain a four per cent CRAR (capital-to-risk weighted asset ratio) as stipulated by RBI," said Nabard regional general manager K Venkateswara Rao on Friday.  However, Rao hastened to add satisfactory performance does not mean the bank was in an unhealthy state. "It means the banks have to raise their bar to the yardstick set by the RBI. At least 11 banks in the state are functioning without a licence as they do not comply with the RBI's norm,” he said.  NABARD officials, however, refused to name the banks which are functioning without licence as "it would lead to unnecessary confusion among depositors." Rao said apart from the unlicensed banks there were also 10 cooperative banks, out of 31 in Maharashtra, that are found not adhereing to Section 11 of the Banking Regulation Act. “These are banks whose net negative worth is increasing. These are banks who are lending but not making provisions if a loan amount is not being recovered or is likely to turn into bad debts,” he said. Officials said in such caes, there is reduction in value of assets compared to funds. Rao said the erosion in deposits reflects the state of the bank. "If there is more than 50% erosion, the condition of bank is not good as per the RBI norms.”