Severe differences have cropped up between the National Bank for Agriculture and Rural Development (Nabard) and Batliboi & Co over the accounts of the Maharashtra State Cooperative Bank (MSCB) for 2010-11.
However, both have said MSCB, which is under the administrator’s rule since May 7, has come out of the provisions of Section 11(1) of the Banking Regulations Act, 1949, as its net worth has turned positive. Both Nabard and the statutory auditors were unanimous in their observation that MSCB’s net worth turned positive, compared with a deficit of Rs 144.22 crore in 2009-10. According to Nabard, the net worth stood at Rs 131.39 crore, while the statutory auditors said it stood at Rs 404.74 crore
MSCB's 44-member board was dissolved by the state government following the Reserve Bank of India's (RBI) recommendation, based on the inspection report by Nabard for 2009-10 accounts. Nabard had expressed concern over the sharp deterioration in networth, the continued shortfall in making adequate provisions for liabilities and non adherence to banking prudence and financial discipline. A Nabard official confirmed the submission of the report to MSCB. However, an MSCB official declined to comment, saying the reports would soon be placed before the board of directors.
Nabard has, in its inspection report for 2010-11 accounts, estimated MSCB's net non-performing assets (NPAs) at Rs 746.56 crore, or 8.47 per cent. However, MSCB's statutory auditors, Batliboi and Co, calculated the net NPAs at 4.27-5 per cent, or Rs 375 crore. According to Nabard, gross NPA was calculated at Rs 2,919.21 crore, or 26.56 per cent, while the statutory auditors estimated it at Rs 2,584.87 crore, or 23.52 per cent. Nabard also said there was a shortfall of Rs 216.48 crore in NPA provisioning for 2010-11.
The net loss calculated by Nabard stood at Rs 637.22 crore, against Rs 364.83 crore estimated by statutory auditors. During 2009-10, the bank's loss was calculated at Rs 775.98 crore.
Nabard and the statutory auditors also differ over the MSCB's capital-to-risk (weighted) assets ratio (CRAR), which turned positive from a deficit of 1.5 per cent in 2009-10. According to Nabard, MSCB's CRAR stood at 1.91 per cent, the figure stood at 5.86 per cent, according to the calculation of the statutory auditors.
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Nabard stuck to its argument that MSCB needed to achieve 4 per cent CRAR to be eligible for the issuance of a licence by RBI by March 31, 2012. The plan may contain, among others, proposals for the augmentation of capital, including support from the state government, within the framework of the amended Maharashtra Cooperative Societies Act, the recovery of chronic overdues and improving the bank's operational efficiency.
However, a former MSCB director, on the condition of anonymity, told Business Standard, “The ball is in the court of the state government. Of the Rs 1,800 crore, the state government has, so far, provided MSCB only Rs 270 crore towards the guarantee given by the bank to various cooperative units. The Supreme Court has already ruled in MSCB's favour, saying it was entitled to the entire Rs 1,800 crore from the state government for the guarantee. The government would have to do it fast, as it would pave the way for the bank to get a licence from RBI by March next year.”