Punish the guilty, spare the movement: Co-ops

Our Economic Bureau

New Delhi, April 14 : THE National Cooperative Union of India (NCUI) has condemned commercial banks for trying to wean away deposits from urban cooperative banks in the wake of the Madhavpura Mercantile Co-operative Bank (MMCB) stock market scam.

NCUI president SS Sisodia told the press here on Saturday that efforts were being made to tarnish the image of the entire co-operative movement for the fault of a few individuals. He pointed out that the crisis had come about because the MMCB chairman, managing director and a few brokers had broken norms for market manipulation.

Since the Reserve Bank of India was entrusted with the monitoring of banks’ functioning, there was laxity on its part as well in detecting the irregularities at the initial stages, he added. However, both the public sector and private banks were creating the impression that all was not well with the entire sector, he regretted. National Federation of Urban Cooperative Banks and Credit Societies chief executive D Krishna pointed out that the urban co-operative banking sector comprised over 2,000 banks, 51 of which were scheduled banks. The aggregate deposits with the urban banks exceeded Rs 72,000 crore and advances Rs 45,000 crore as of March 31, 2000.

The NCUI along with the national and state federations recently called for a bail-out package from the government, that is, furnishing guarantee for a limited period for funds to be provided by urban co-operative banks to prevent the liquidation of MMCB.

A five-member rehabilitation committee, set up by the Reserve Bank, would also submit its report by the month-end. If found feasible, the recommendations might help avoid closure of the bank, Mr Krishna said.
MMCB is the second largest urban co-operative bank in Gujarat. Registered under the Multi-State Coop Societies Act, it has a branch in Mumbai and has thus been providing remittance and drawing facilities to other urban banks in Gujarat at nominal rates. In turn, over 165 banks had been keeping deposits worth over Rs 600 crore with MMCB. It had another Rs 600-700 crore deposits from the public.

MMCB had lent nearly Rs 1,500 crore, as a result of which the credit deposit ratio stood at 100 per cent. The crisis began building up around January and erupted on March 9.