Royale Bank of Surat barred from clearing house

The Surat-based Royale Co-operative Bank Ltd was suspended from the clearing house on Wednesday by the Surat Bankers Clearing House.

"Royale Co-operative Bank failed to meet its clearing obligations on Wednesday. The decision to suspend the bank from clearing house was taken by the Surat Bankers Clearing House (SBCH) pursuant to Regulation 13 (d) of Uniform Regulations & Rules for Bankers Clearing Houses (HB & RBCH)," Narahari Rao, president, SBCH, told Business Standard.

"Royale Bank was experiencing strain in settlements since the last three days. The bank was somehow managing the funds, and continued being a member of SBCH. But the bank could no longer meet the clearing requirement and hence has been suspended from clearing. The bank ceases to be our member now," Rao said.

"The bank was at least Rs 13 lakh short for meeting the clearing requirement. It had against cheques of Rs 52 lakh, while cheques worth Rs 39 lakh were in its favour. Out of the cheques of Rs 39 lakh, cheques worth Rs 33.87 lakh were returned by other banks," said Rao.

According to RBI norms, the maximum limit of returnable cheques is 4 per cent, but in the case of Royale Bank, the figure was more than 50 per cent since the last three to four days," Rao said.

"We have advised our members banks not to release credit under any circumstances against the clearing cheques/ instruments drawn on the Royale Bank," he added.

Earlier during the day, a large number of depositors and account holders gathered outside the bank's only branch in Salabatpura. The depositors literally sieged the bank demanding their deposits back. The depositors also heckled some of the media-persons, who were present at the bank.

It was only after police arrived that the depositors calmed down. The bank however failed to return money. Talking to mediapersons, Royale Bank managing director Parul Shah accused bank chairman Jitu Modi of being responsible for the crisis.

"Jitu Modi had granted loans to many of his friends and relatives. We were facing problems in arranging for the cash since some days. Last night, Modi had assured that he would arrange for the cash, but he did not even turn up at the bank today. Even his cell phone is switched off," she said.

"We will try to make arrangements for the cash. We are also talking to some banks seeking their help. We are hopeful that we would be able to work out some sort of an arrangement shortly," she added.

Though the exact figures are not available, according to industry sources, the total number of depositors of Royale Co-operative Bank is somewhere around 7,000. The bank's total deposits are in the region of Rs 11-12 crore, while its loan advances stand at around Rs 7-8 crore. The bank was established in 1999.