Depositors losing faith in Surat co-operative banks

Surat is fast gaining notoriety in the co-operative banking sector, with the Reserve Bank of India (RBI) revoking the licence of two Surat based co-operative banks in the past fortnight alone. Two other banks from the city have been in the news for panic withdrawals and other alleged irregularities.

"The people of Surat are not only losing faith in the co-operative banking system, there is an extremely high level of anger and frustration too. The problem is that in the past decade or so, so many co-operative banks have cropped up in Surat and almost all of these have not been managed professionally," said Dinesh Mandlaywala, president of the Southern Gujarat Chamber of Commerce and Industry.

Mandlaywala added that, barring five or six co-operative banks in Surat, all the others have come up with big dreams, but have not been managed well.

"A major portion of the blame must go to the bank directors and chairpersons, who have provided loans at will," he said.

All Gujarat Co-operative Banks Depositors and Account Holders Association (AGCBDAHA) president Prakar Gurjar said that, while aftershocks of the Madhavpura crisis are being felt across co-operative banks in Gujarat, the panic is more evident in Surat.

This is because a couple of political leaders associated with Surat's co-operative banking sector have been in the news lately.

"Depositors in Surat are more apprehensive than those of other banks because former MP Kanksinh Mangrola and C R Patil too have been in the news for their role in the Diamond Jubilee and Suryapur Co-op bank scams," he said.

As in almost all other cases where co-operative banks have gone weak, alleged mismanagement by the directors and office bearers of the banks have been cited as the reasons for the loss of trust of customers in the banks. And the fact that the RBI has revoked the licences of the banks means that there was little or no scope of the banks being revived.

On Wednesday, the RBI revoked the licence of Vikas Co-operative Bank. According to bank administrator R M Asodia, the chairman and the vice chairman are the biggest defaulters of the bank.

Earlier, on August 18, the RBI had revoked the licence of Surat based Suryapur Co-operative Bank, paving the way for its liquidation.

The bank was suspended from clearing house operations and was not involved in banking operations since August 2002, mainly because it failed to maintain the statutory liquidity ratio.

The bank's founder chairman Kanaksinh Mangrola, a former BJP MP, and other authorities allegedly granted loans indiscriminately, which could not be recovered. Police cases were registered in the Rs 44-crore Suryapur Bank scam and several persons, including the bank's directors were arrested.

There were also panic withdrawals at the Surat branches of Gujarat Industrial Co-operative Bank (GICB) following a DICGC circular that deposits of multi state co-operative banks were not insured with it. All three branches of the bank in Surat witnessed heavy withdrawals as the GICB is a multi state co-operative bank.

The sorry state of affairs in Surat

• Septmeber 1, 2004: RBI revokes licence of Vikas Co-operative Bank (in picture)
• August 31: Surat Bankers' Clearing House suspends Century Co-operative Bank from clearing house
• August 18: RBI terminates licence of Suryapur Co-operative Bank
• August 12: Gujarat High Court supercedes board of City Co-operative Bank
• August 12: Panic withdrawals at the Surat branches of Gujarat Industrial Co-operative Bank
• June 19: Reserve Bank terminates licence of Diamond Jubilee Co-operative Bank