MMCB to request Rs 500 cr central aid

Co-operative may suggest merger with a bank

Even as doubts are being raised over whether the beleaguered Madhavpura Mercantile Co-operative Bank (MMCB) will be revived, a team comprising MMCB chairman Jairambhai Patel, senior Congress leader Narhari Amin and other co-operative banking leaders are leaving for New Delhi on Monday to seek a revised revival package for the bank.

MMCB has worked out two options for the bank revival. First, the bank will seek a fund of Rs 500 crore from the central government that will be instrumental in putting the bank back on track.

If this option does not work out, MMCB must be merged with a strong bank, say officials.

In fact, Jairambhai Patel has even named the possible banks with which MMCB can be merged "" Bank of Baroda, Dena Bank and State Bank of Saurashtra.

Those in the co-operative banking sector are, however, sceptical about the new revival plans. They say instead of seeking more funds, MMCB should have improved its position during the time allotted to it.

"Our first demand will be to revive MMCB by infusing Rs 500 crore. If that does not work out, then it could be merged with another bank. The Union government has a responsibility to see that co-operative banking does not collapse," said Jairambhai Patel.

Former deputy chief minister and senior Congress leader Narhari Amin said, "The government at the Centre has changed. It is now a Congress-led government. We will speak to the finance minister, the prime minister and officials of the Reserve Bank of India (RBI) for a new revival package. Even (Congress leader) Ahmed Patel has explained MMCB's position to Sonia Gandhi and something positive will emerge," said Amin.

Asked if it was proper to keep seeking funds for the crisis-hit bank without undertaking any recovery actions, Amin asked, "Can we allow it to just shut down, leaving another 40 to 50 banks who have deposits in it fighting for survival?"

Several banks have deposits of over Rs 600 crore in the bank. The RBI asked the banks to classify these deposits as non-performing assets (NPAs) by March 2005.

The tenure of the revival package which was charted out for the bank three years ago ends on August 24. While the bank has recovered around Rs 250 crore from defaulters over the past three years, it has not managed to recover a majority of the dues.

As far as the dues of Ketan Parikh are concerned, MMCB has recovered just Rs 22 crore instead of the Rs 380 crore that he is said to owe the bank.

The Reserve Bank of India suspended MMCB from clearing house operations in March 2001 after a preliminary inquiry revealed that the bank was facing a major liquidity crunch and was in the eye of a pay order scam allegedly involving Ketan Parikh.

The bank was established on October 10, 1968, and received scheduled bank status in the 90s.

The new status allowed it to expand banking operations and start lending to stock brokers.

MMCB faced its worst crisis on March 8, 2001, when panicky depositors started withdrawing money following reports that the bank had given a huge bank guarantee to Ketan Parikh and as a result the bank was left with very little liquidity.