Surat bank depositors left in the lurch

The co-operative banking sector in Surat is undergoing a deep crisis. The Reserve Bank of India had put restrictions on four co-operative banks in the city in the last two months which created panic among the depositors.

Even though the situation has somewhat returned to normal, the struggle continues for most of the banks put under the RBI scanner.

In recent months, The Century Co-operative Bank was the first one to be caught in a crisis. It was suspended from clearing house on August 31, while restrictions under Section 35 (A) of Banking Regulations Act, were placed on it by RBI on October 11. Its total deposits are in the region of Rs 11 crore, while the loan advances are in excess of Rs 14.75 crore.

Talking to Business Standard, Century Bank CEO Ramesh Rajput, said, "We are trying to recover the loan amount. We have got assurances from many people that they would repay the bank loan after Diwali. We have already issued notices to all the people who owe money to the bank. If they do not repay the money, we will file civil suits against them."

To a query if Century Bank would be able to resume banking operations, Rajput said, "It all depends on bank chairman Hariprasad Malpani (who is at present in jail in connection with a fraud case). The chairman and his group owe approximately Rs 6-7 crore to the bank, so if they repay money, the bank can certainly restart functioning. But I do not know whether they are willing to repay the money or not."

The next bank was caught in troubles was The Royale Co-operative Bank. It was suspended from clearing house on October 6, and restrictions clamped on it by RBI on October 14.

Royale Bank chairman Jitu Modi, said, "In accordance with RBI norms, we are currently repaying upto Rs 500 to each account holder. We have issued recovery notices to 35 defaulters, and are hopeful of recovery. Nine defaulters, who owe approximately Rs 2.50 crore to the bank, have assured to repay the loan in the next couple of days. If they do not do so, we will be lodging police complaints against them."

There was more hope than optimism in the voice of Ramesh Rajput and Jitu Modi, and though they are not saying it, one can certainly feel that they have given up the hopes of ever restarting the banks. Things, however, appear to very different at The Metro Co-operative Bank.

The Metro Bank had voluntarily sought to withdraw from the clearing house on October 20, while restrictions under section 35 (A) of Banking Regulations Act was imposed on it the next day.

"Since Metro Bank was caught in a crisis, we have recovered between Rs 70-80 lakh. The bank's loan advances still stand at Rs 15.50 crore, but we are extremely confident that we will recover each and every penny," bank chairman Kamalkishore Kapuria told Business Standard.

"We need Rs 3-3.25 crore to settle the NPAs and overcome liquidity problems. As soon as the money is arranged, which we believe would take a month or so, we will approach RBI requesting it to lift the restrictions. Once the restrictions are lifted, we will seek permission to resume clearing, and restart banking operations," Kapuria said.

The real picture about the future of these banks will be known only in the coming months. There is some relief in the fact that even if these banks are liquidated, deposits are insured by Deposit Credit Insurance Guarantee Corporation (DCIGC).