'MMCB directors must infuse fresh capital'

Nutan Nagarik Sahakari Bank (NNSB) chairman Parthiv Adhyaru said on Monday that, while it is necessary to revive the Madhavpura Mercantile Co-operative Bank (MMCB), it will be inappropriate for the bank to compel other banks to extend monetary help to it in the form of loans.

Instead, Adhyaru said, the directors and shareholders of MMCB must raise fresh capital to save the bank.

"I think it is improper to seek funds, either from the government or from other banks, to revive the bank. Instead, the directors and shareholders of MMCB must raise fresh capital to help revive it," Adhyaru said.

Adhyaru felt the Securitisation Act, which was meant to enable banks to recover dues from defaulters without resorting to the legal recourse, is not serving its purpose.

"Provisions of the Securitisation Act allow for attaching properties of defaulters, but there are several instances where banks have not been able to sell off properties attached for more than a couple of years. Banks invariably do not get the actual price of the properties, which have to be disposed off at prices lower than what they actually are worth," the NNSB chairman said.

Emphasising on the need to be able to attach and sell even properties that are not mortgaged while taking loans, Parthiv Adhyaru said: "There are numerous instances where defaulters simply shrug off responsibility to pay, stating that they have not funds. Banks should be allowed to attach their huge properties that are not mortgaged and sell these to recover dues."

The NNSB chairman is also against MMCB unilaterally reducing the rate of interest at which it was supposed to repay banks their deposits. Several banks had deposited hundreds of crores of rupees with MMCB before it went weak, as it was offering higher returns on deposits.

Various co-operative banks of the state deposited around Rs 325 crore with MMCB as part of its revival package that was worked out in 2001.

MMCB had then assured that it would repay the deposits with a 7.5 per cent interest. However, even as the term for the revival package expires later this month, MMCB has made a proposal to the state and central government, wanting the rate of interest to be reduced to four per cent.

A team of MMCB officials even visited Delhi a few months ago, and met RBI and Central Registrar of Co-operatives officials to seek reduction in interest rates of deposits meant for MMCB revival.