Govt turns down MMCB's request for Rs 500cr bailout

The Centre has rejected the Rs 500 crore revival grant sought by the crisis-ridden Madhavpura Mercantile Co-operative Bank (MMCB), stating that such a move would set a bad precedent.

Open to the idea of merging MMCB with another bank, the Centre is understood to have told a delegation that it would endorse a merger of MMCB with another bank, but was not in a position to grant any funds to the bank.

However, bank officials admit that no bank has shown interest in taking over MMCB. The delegation was in Delhi on Monday.

Officials of the Union agriculture and co-operation ministry were to meet on Friday to evaluate the progress of the bank as far as recovery of dues is concerned. They may also suggest some changes in the existing revival package.

MMCB chairman Jairambhai Patel, accompanied by Gujarat Urban Co-operative Banks Federation secretary R S Patel, Gujarat State Co-operative bank chairman Ghanshyam Amin, former deputy chief minister Narhari Amin and others, met Union finance minister P Chidambaram, agriculture and co-operation minister Sharad Pawar and other officials.

On the outcome of the meeting, Patel admitted that the Centre categorically rejected the Rs 500 crore grant that had been sought for its revival.

"We were told that co-operatives is a state government matter and that this issue ought to be sorted out by the state government. The Central government, however, readily accepted the proposal of merging MMCB with another bank," said Patel.

Patel said: "I do not think the state government will provide funds for the revival of the bank. This effectively means that the Rs 500 crore we had sought will not come. As of today, no bank has shown interest to take over MMCB. I cannot really state categorically about the future of MMCB."

The tenure of the current revival package, which was charted out for the bank three years ago, ends on August 24, 2004.

While the bank has recovered around Rs 250 crore from defaulters over the past three years, it has not recovered majority of the dues.

Of the Rs 380 crore dues of former stock broker Ketan Parikh, MMCB has recovered just Rs 22 crore.

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