Following the directions issued by the Reserve Bank of India (RBI), the Gujarat registrar of cooperative societies (RSC) today appointed an administrator to supersede the board of directors and take charge of the Ahmedabad-based General Cooperative Bank.
However, while the newly-appointed administrator B P Bhatt, who is a retired Class-I officer of the Gujarat state cooperative department, took over charge at GCB today, none of its 12 branches opened for business. Only the GCB head office situated in the Usmanpura area of the city opened today.
Hence even those customers, who had come to the GCB branches with the intention of withdrawing the maximum permissible Rs 1,000 from their current and savings bank accounts, had to go back disappointed.
The RBI had yesterday indefinitely suspended GCB from the clearing house as the latter did not have sufficient balance to honour instruments presented for clearing.
RBI regional director (Gujarat) V S Das said the total number of depositors of GCB currently stands at around one lakh. As all the depositors are covered under the Deposit Insurance & Credit Guarantee Corporation scheme and the relevant insurance premium has also been paid up, deposits to the tune of Rs 1 lakh are safe, he added.
Revealing that around 80,000 of the depositors are under the category of those having deposits up to Rs 1 lakh, he said, "They have nothing to panic because even in the worst case scenario of GCB going into liquidation, they would get back their deposits in full."
The bank had been witnessing long queues of customers at its 12 branches in the city since last Thursday.
However, the bank has been somehow managing to arrange for the requisite liquidity and has till today ensured that none of its customers have had to go back without being able to effect the desired withdrawals. To tide over the acute liquidity crunch arising out of the large withdrawals witnessed during the last few days, General Cooperative Bank today borrowed Rs 5 crore from the apex Ahmedabad District Cooperative Bank.
Speaking on condition of anonymity, GCB sources said the allegations, appearing in the media, "about huge defaults by the bank's chairman Hasmukh Shah and one of its directors N C Shah are baseless". They, however, admitted that the chairman has borrowed around Rs 34 crore and N C Shah has borrowed another Rs 45 crore from GCB.
Emphasising that neither of them have defaulted on the repayments due, the sources said: "Even in case of other advances there is not any significant defaults. Moreover we have taken adequate security against each loan, so we are not unduly worried."
Attributing the liquidity crunch faced by GCB to adverse press reports and the large withdrawals consequently being made by its customers during the last few days, they said: "We have approached the Gujarat State Cooperative Bank for extending liquidity support and they too have assured us that they are willing to advance requisite funds tomorrow."
GSCB sources confirmed that their bank would extend a fund support of Rs 5 crore on Tuesday to GCB to enable it to tide over its liquidity crunch.
Around 18 months back, GCB was categorised as a weak bank by the Reserve Bank of India following erosion of its net assets beyond 25 per cent. Reliable sources in the RBI said the central bank has been continuously monitoring this bank and they have not found anything to panic about.
"However GCB would have to keep on arranging liquidity on day-to-day basis till they are able to tide over the current liquidity crisis and win over the confidence of their customers," they added.
According to GCB sources, their bank disbursed Rs 1.80 crore today and their total deposits stood at Rs 136 crore and advances at Rs 130 crore.
Claiming that GCB would be able to come out of this crisis within the next couple of days, they said, "Our bank has not diverted any funds into the stock market or into any other speculative activities."
They said that RBI had categorised GCB as a weak bank as it had witnessed huge withdrawals more than 18 months back because of similar adverse press reports that had appeared against the bank during those days. These reports were basically motivated due to personal rivalry with the GCB directors," they added.
