WB Co-operative Bank violates borrowing limits

West Bengal State Co-operative Bank (WBSCB) has exceeded its borrowing limit by as much as Rs 3468 crore in 2003-04, according to its recently finalised accounts.

The paid-up share capital of the bank stood at Rs 16.54 crore while its reserve fund which was separately invested stood at Rs 10.12 crore thus totalling Rs 26.66 crore.

Borrowing limit accordingly thus stood at Rs 666.5 crore.

However, the bank ended up with borrowings of Rs 4135 crore, thus exceeding its limit by as much as Rs 3468.5 crore.

Banking sector sources said the dangers of such unlimited borrowing was apparently being ignored by the regulatory authorities and the state government.

The bank borrowed Rs 700 crore from National Bank for Rural and Agricultural Development Bank (Nabard) while its received Rs 3,200 crore from depositors.

It received another Rs 150 crore institutions and a sum of Rs 8.36 crore from SIDBI.

Meanwhile, it revised its upward borrowing limit to Rs 5,000 crore for 2005-06. WBSCB admitted in its report that because its borrowing limit would be more than 25 times its paid-up capital, it would seek permission from the Registrar of Co-operative Societies for an exemption.

It said it hoped to receive around Rs 3,500 crore from depositors and another Rs 900 crore from Nabard, while a further Rs 100 crore was expected from the state government, World Bank, SIDBI and the West Bengal Housing Board.

In a parallel development, WBSCB has decided to distribute mutual fund and general insurance products and also to act as a government agent for selling government bonds.

"In a bid to enhance the bank's fee-based income, we have decided to distribute mutual funds, general insurance products as well as government bonds," explained Samara Ghosh, chairman of WBSCB.

To this effect, it has also recently amended its by-laws that would allow WBSCB to sell mutual funds.