NAGPUR: The Reserve Bank of India (RBI) calls it ‘corrective action’. With it, over Rs 250 crore of hard earned money belonging to around
1,80,000 depositors of three prominent urban co-operative banks of the city has been locked up indefinitely.
On Wednesday, it was the turn of 60,000 customers of Parmatma Ek Sevak Bank to taste the RBI bitter pill. The customers of Nagpur Mahila Nagari Sahakari Bank and Samata Nagari Sahakari Bank already know the feeling.
Each of these banks had close to 60,000 depositors. Now they await helplessly for things improve so they can get their money back. Which may never happen. And the banks’ directors and defaulters, who brought the banks to this pass, haven’t lost a stitch of their shirts.
Bank depositors are shocked at a system that punishes the innocent while apparently rewarding the crook. They want to know whether it is time to take action against regulators who were either asleep at their watch or too indulgent of the crooks.
Customers are entitled to ask just whose side the regulatory agencies are on? The RBI restrictions did not come overnight. Regular inspections and audits at Parmatma have pointed irregularities. RBI officials now say if they had not imposed restrictions, the bank would not be able to meet commitments to the depositors. Which is what is happening with the restrictions too.
Why did the RBI not act when loans were given flouting all norms? Why the state cooperation department, that also monitors the banks, did nothing? Experts in co-operative banking say an early RBI action would have stemmed the rot.
A S Dani of A S Dani and Company, the chartered accountants firm which conducted the audit at Parmatma Bank, said financial sickness was not an overnight phenomenon and timely action could have prevented such an extreme step. “Audits are undertaken every year and the problems highlighted. Our firm did the same. It is up to the RBI and the co-operation department to take action. The Parmatma Ek Sevak Bank has been facing problems for the last 7-8 years,” he said.
Apart from regular audits, even flying squads visit the banks. What did they do? It is surprising that the RBI or the co-operation did not take any action against any of the banks, said Kailashchandra Agrawal, a former member of the task force on co-operative urban banks (TAFCUB). Moreover, the move to stop deposits and loans in Parmatma Ek Sevak Bank, only worsened the situation. Probably, allowing it to function normally could have helped it survive, he said.
A chartered accountants’ firm conducts an yearly audit on behalf of the co-operation department. Apart from this, the RBI conducts a yearly inspection of a bank categorised as Grade 4 or Grade 3 institutions. All the three banks facing restrictions were of Grade 4. The grades are allotted on the basis of financial performance.
While the audit restricts into verifying the authenticity of financial transactions reported in the accounts, inspection has deeper focus. If a fraud has been committed, it can be easily detected in an RBI inspection, said a source. Both RBI and Co-operation department officials admit that glaring irregularities came to fore and were also pointed out to the bank’s management. But they cannot explain lack of action on their own part.
The RBI had warned the management in Parmatma Ek Sevak Bank, and also barred it from taking fresh deposits or lending. However the management continued to be negligent and things deteriorated. An RBI official said they gave the management an opportunity to improve, but in vain.
At times, it is difficult to recover the money, added the joint divisional commissioner of co-operatives, Dushyant Sidam. There have been several cases of reckless lending without verifying the borrowers credentials in all three banks. While in Samata Bank there have been cases of amounts being lent against non-existent properties, he pointed out.
The co-operation department has powers to dissolve the board of directors. While Arun Aakre, the chairman alleged of mass irregularities in Parmatma Bank, was removed, the old management continued in the other two banks.
http://timesofindia.indiatimes.com/Nagpur/Locked_up_Rs_250_cr_of_180000_depositors_money/articleshow/3710712.cms
