Administrators for 2 Surat banks

Royale Bank has deposits of Rs 14 cr, while Vitrag Bank's deposits base stands at Rs 9.63 cr

In yet another blow to the co-operative banking sector of Surat, the state government on Monday appointed Surat district registrar (co-operatives) R R Waghasia as the administrator for two banks in the city.

"I received a letter today, wherein the state government has asked me to take charge as administrator of The Royale Co-operative Bank and Shree Vitrag Co-operative Bank," Waghasia said.

The move was on expected lines as these banks have been out of business for more than one-and-a-half months. With the administrator's appointment, the recovery of loans from defaulters is expected to be speeded up.

Royale Bank has been a victim of mismanagement on the part of bank chairman Jitu Modi and managing director Parul Shah, as they shelled out loans indiscriminately.

The bank was caught in a crisis owing to a liquidity crunch, and was barred from clearing operations on October 6. The bank was restricted to pay only up to Rs 500 per depositor on October 14.

Royale Bank has 20,000 depositors with deposits of Rs. 14 crore. The bank's loan advances stand at Rs 17 crore. In the case of Vitrag Bank, financial irregularities committed by the bank chief executive officer Naresh Shroff led to it's collapse.

Shroff gave temporary overdraft of crores of rupees to some customers, which the bank never recovered.

On account of the liquidity crunch, Vitrag Bank was suspended from clearing operations on October 16. Restrictions were placed on it by RBI six days later. Vitrag Bank has 4,332 depositors with deposits in the region of Rs. 9.63 crore. The bank's loan advances, excluding the temporary over draft, are worth Rs. 6.27 crore.

Vitrag Bank has lodged a complaint of fraud against more than 50 persons, including Shroff. Shroff and one accused have been arrested, while others are still at large. Experts feel that the appointment of the district registrar as the administrator will hardly make any difference to the financial condition of the banks.

"Banks such as Diamond Jubilee Co-operative Bank and Suryapur Co-operative Bank were under administrators for a long period, but none could make any substantial recovery. All these banks have been liquidated. So there is no reason to believe that administrators will be of any help to banks, or depositors," an industry expert said.