RBI to withdraw notice on NPAs

State government and officials of the Madhavpura Mercantile Co-operative Bank (MMCB) on Tuesday claimed that the Reserve Bank of India will soon withdraw a circular that asked co-operative banks having deposits with MMCB, to classify them as non performing assets (NPAs) by March 31, 2005.

However a RBI spokesperson said such a decision has not been taken as yet.

If implemented, the circular would literally mean severe crisis for about 50 co-operative banks of the state, which have deposits with MMCB.

Around 160 banks had deposited over Rs 635 crore with MMCB, as they were promised a higher rate of interest. However, with the bank going weak, it has not been able to repay the deposits, along with interest, to the banks.

"Yes, the RBI and the finance ministry officials have assured us that the circular will be withdrawn. We expect the notification to be issued by Thursday. The revival package of MMCB is an ongoing process and even when the RBI circular was issued, we had made a representation, opposing it," said R S Patel, director, MMCB, when asked if the RBI had agreed to withdraw the circular.

Meanwhile, an official statement issued by the state government said that the RBI will soon withdraw its circular on NPAs.

However, a RBI spokesperson, when contacted, did not confirm that the circular will be withdrawn. As of today, there is no confirmation that the circular on NPAs will be withdrawn," the spokesperson said on Tuesday.

The Reserve Bank of India, in a circular dated July 21, 2004, had told urban co-operative banks that had deposits with MMCB that they will have to classify these deposits as non performing assets (NPAs) as of March 31, 2005.

The RBI had resorted to this step after the MMCB had failed to implement the scheme of reconstruction that had been chalked out for it.