Central aid sought for MMCB revival

Team meets RBI officials, discusses FD rate cut

In a move that could further dampen the spirits of the beleaguered Madhavpura Mercantile Co-operative Bank depositors, a five-member delegation on Wednesday met officials of the Reserve Bank of India and the Central Registrar of Co-operatives and sought a reduction in the interest rates on fixed deposits and extension of the time limit for repayment of money of depositors.

The team comprising the registrar of co-operatives, Gujarat, MMCB chief executive officer B K R Maruthy, Jatindra Mehta, chairman of Rajkot Nagarik Co-operative Bank, R C Padiya, chief executive of Gujarat State Co-operative Bank, and R S Patel, director of MMCB, met the officials in Delhi.

"Though I am not in a position to divulge the exact details of the meeting, the outcome will definitely be positive for the MMCB," said bank chairman Jairambhai Patel.

Patel said as part of the revival package, the delegation is also learnt to have sought financial aid from the central government.

"The delegation has called for better co-ordination between the central and the state governments in reviving the bank, including seeking central aid for the bank," Patel said.

MMCB is said to have sought approval from the RBI for slashing the interest rate on deposits from the existing eight per cent to 4.5 per cent.

The bank is also said to have sought an extension of two more years for repayment to the depositors.

The Bank is supposed to pay back depositors interest at the rate of eight per cent on public deposits of Rs 200 crore and at the rate of 7.5 per cent to banks and other financial institutions for a deposit of around Rs 800 crore.

So far, the bank has repaid Rs 235 crore as interest to depositors, while it has recovered Rs 208 crore from defaulters.

The bank ran into rough weather in March 2001 after the RBI withdrew it from the clearing house after a preliminary inquiry revealed that the bank was facing a major liquidity crunch and was in the eye of the pay order scam involving Ketan Parikh.

It faced its worst crisis on March 8, 2001, when the depositors panicked and started withdrawing money following reports that the bank had given a huge bank guarantee to Ketan Parikh.

The crisis forced the RBI to step in and take some action to limit the damage. An inquiry by the RBI showed that the bank had a severe liquidity crisis. The RBI recommended the registrar of co-operative banks to supersede the board of the bank.

At present, MMCB has to repay depositors Rs 200 crore and Rs 800 crore to other banks.

The RBI, in October last, issued instructions to the bank to expedite recovery of dues by seizing properties owned by defaulters.

The bank has since begun issuing notices and seizing properties. It has since been seizing and auctioning properties of defaulters.