The Reserve Bank of India (RBI) on Friday superseded the board of directors of Abhyudaya Cooperative Bank for a period of 12 months for “poor corporate governance” and appointed former State Bank of India chief general manager Satya Prakash Pathak as the administrator.
“In exercise of the powers conferred under Section 36 AAA read with Section 56 of the Banking Regulation Act, 1949 (as applicable to co-operative societies), the Reserve Bank has superseded the board of directors of Abhyudaya Cooperative Bank for a period of 12 months. The action is necessitated due to certain material concerns emanating from poor governance standards observed in the bank,” the central bank said.
The RBI has also appointed a ‘committee of advisors’ to assist the administrator. The members of the committee are: Venkatesh Hegde, former general manager at SBI, Mahendra Chhajed, chartered accountant, and Suhas Gokhale, former MD of COSMOS Co-operative Bank.
“No business restrictions have been placed by RBI and the bank shall continue to carry on its normal banking activities as is hitherto, under the guidance of the administrator,” the central bank said.
Speaking to FE, Abhyudaya Cooperative Bank chairman Sandeep Ghandat said: “Our bank has an RBI-appointed additional director (Rajendra Kumar) since last two years, who is serving as the DGM (deputy general manager) at the central bank. There was a meeting of bank officials on 29th (with Kumar)… he also booked a hotel for it, but they took action without information.”
He said the representative of the regulator also took monthly review of bank operations. In the last two years, the cooperative bank has been able to trim bad loans from Rs 1,550 crore to below Rs 1,200 crore. “The bank was improving, but this action was taken, which has hit morale.”
According to Abhyudaya Cooperative Bank’s last published results on its website, the lender posted a net profit of Rs 16.22 crore for FY20, compared with Rs 21.58 crore during FY19. As of March 2020, its overall advances stood at Rs 6,654.37 crore, whereas overall deposits was at Rs 10,838.07 crore.