RBI notice puts co-op banks in a fix

SANGLI: District and urban co-operative banks in the state, which have invested Rs 443 crore as deposits with the Maharashtra state cooperative cotton growers’ marketing federation (MSCCGMF), are in a fix as the Reserve Bank of India (RBI) has issued notices to them to pay a fine for investing money outside the banking sector.
The banks had invested in the deposits, which promised a return of 15 per cent per annum, in March 2000, against the wishes of the state co-operatives department.But the marketing federation today is not in a position to either return the deposit amount or pay the agreed interest to the banks.
The banks which have deposits with the MSCCGMF include Janata Sahakari Bank, Cosmos Co-operative Bank, the Deccan Merchants Bank, Pune, Abhyuday Co-operative Bank, Mumbai, and the Sangli Urban Co-operative Bank.
The RBI has directed the banks to show the deposits as ‘non-performing assets’ in their annual statements if the deposits are not returned to them in the current financial year. “If this directive is implemented, many of the banks, despite their sound financial position,would seem to be making losses,� says Bapusaheb Pujari, chairman of the Sangli Urban Co-operative Bank.
Even after the RBI notices to the banks, the co-operatives department or the state government have not come to the rescue of these banks, causing panic among the bankers, Pujari said.
The MSCCGMF had paid 15 per cent interest in the first year and had urged the banks to renew their deposits for another year. Later, the MSCGMF slashed the interest rate to 12.5 per cent without even intimating the banks. In the third year, the federation has failed to pay interest to the depositors.
“Since the banks had invested in the deposits against the wishes of the state government, it has chosen to ignore our predicament,� Pujari pointed out.