The bank has shown Rs 83 crore as non-performing assets (NPAs) for the total deposits of Rs 183 crore. The Reserve Bank of India (RBI) has directed the BSCCBL to preclude with effect from January 12, 2005 from incurring any liability, including the borrowal of funds, renewing loans, advances or making any payments, discharging any liability except in accordance with the provisions of the directive.
With this notice, the bank has stopped all payments to its 28,000 depositors.
According to a source, RBI has directed the co-operative bank to stop all transactions till the NPAs comedown to 10% of the total deposits. Currently NPAs are around 48% of the total deposits, which is around Rs 183 crore. For most of the NPAs, the bank doesnt have adequate securities. It is very difficult for the bank to get back its outstanding loan amount, he said.
Sources also said that, this is a souharda co-operative bank which means government doesnt have any role to play in appointing auditors. The government wanted to bring in the corporate culture among the co-operative banks. Souharda banks are usually a kind of hybrid version of corporate and co-operative bank. The government doesnt have much role in such banks, said N Nityananda, former chairman of Auditing and Assurance Board of India.
According to Vishnu Bharath, a banking expert and chartered accountant, as a next step RBI will start the liquidation process if the bank fails to collect its dues in stipulated time. Being a co-operative bank, customers who have deposited money to the extent of Rs 1 lakh or less will get back their amount, as this will have an insurance cover.