TN govt to provide Rs 12.50 cr to Sivagangai Coop bank

On the insistence of the Reserve Bank of India, the Tamil Nadu government has decided to infuse fresh funds of Rs 12.50 crore into the Sivagangai District Central Co-operative Bank (SDCCB).

A Tamil Nadu press statement said that the state government will give Rs 5 crore as an outright subsidy and Rs 7.50 crore will be extended as share capital assistance.

This capital infusion is expected to revoke the RBI's orders curtailing the transactions of the SDCCB and the bank to function.

The RBI had come out with its directive on April 5 to SDCCB to stop accepting or renewing deposits and refunding a maximum amount of Rs 1,000 to deposit holders.

The apex bank's directive on SDCCB to close its business activities under Section 35 A of the Banking Regulation Act 1949, had brought to light the fact that the cooperative bank has been bleeding since 1999.

SDCCB had sought for Section 11 (1) of the Banking Regulation Act and was exempted from the purview till March 31, 2004. The Section 11 (1) relates to the minimum paid up capital and reserves of the Banking Regulation Act.

RBI had appointed Nabard to audit the financial accounts of SDCCB for the year ending March 31, 2004. After scruntinising the Nabard audit results ,the RBI has not relaxed the ban on accepting public deposits and indicated to SDCCB to submit its remedial measures on its critical deficiencies in its working and its financial position by the end of August.

After the state government had completed its audit of the financial results of bank in September 2004. Nabard started its audit in October and submitted its report in January 2005 to the RBI.

SDDCB had been incurring losses since 1998-99 to report an accumulated loss of Rs 39.36 crore. The non-performing assets was Rs 75.8 crore estimated to be 35.8 per cent of the total advances. With the real value of the capital being negative at around Rs 26 crore, bank deposits had eroded by 16.9 per cent.