The Union finance ministry has issued an order of moratorium freezing all the transactions in the case of Madhavpura Mercantile Cooperative Bank (MMCB) for a period of one week from August 23 to 29, thereby paving the way for the issue of the much-awaited MMCB revival notification.
The moratorium, issued under sub-section (2) of section 45 of the Banking Regulation Act, 1949 (as applicable to cooperative societies), says, "the MMCB is precluded, during the period of the moratorium, from making any payment or discharging any liabilities or obligations except in accordance with the directions contained in the order of moratorium".
This moratorium is seen by sources in the cooperative sector as a prelude to the much-awaited MMCB revival notification as last week the Central RCS K S Bhoria had said that he can officially issue the MMCB notification only after the Union finance ministry issues the moratorium.
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"The moratorium is mandatory under section 15 of the Multi State Co-operatives Act for declaration of the revival scheme," Bhoria had then pointed out.
The order of moratorium (a copy of which is available with Business Standard, Ahmedabad) further said that Central Government "hereby stays the commencement or continuance of all actions and proceedings against the said cooperative bank during the period of moratorium, subject to the condition that such stay shall not in any manner prejudice the exercise by the RBI of its powers under law to require the winding up of the said cooperative bank".
In the moratorium order, the Central Government has also directed that during the period of the moratorium granted to it, MMCB shall not, without the permission in writing of the RBI grant or renew any loans and advances, make any investment, incur any liability including borrowal of funds and acceptance of fresh deposits, disburse or agree to disburse any payment.
It also states that MMCB will not enter into any compromise or arrangement and sell, transfer or otherwise dispose of any of its properties or assets except to the extend and in the manner specifically mentioned in the said order.
However the order allows withdrawal of a sum not exceeding Rs 1,000 from the total balance in savings banks or current account or any other deposit account as well as renewal of the existing term deposits on maturity in the same name and same capacity.
It also allows payment of premium payable to the Deposit Insurance and Credit Guarantee Corporation (DICGC) as well as incurring of any expenditure that may be required to be met by the bank in respect of carrying on the the day-to-day administration of the bank.
The moratorium order ends with a direction to MMCB that it shall not incur or extinguish any other liability unless specifically approved in writing by RBI.