Adsul calls for meeting to sort Apex Bank fallout

Sugar factories in dire straits over bank's licence cancellation

Union minister of state for finance Anandrao Adsul has called for a meeting of top officials of the Reserve Bank of India, National Bank for Agriculture and Rural Development, Apex Co-operative Bank of Urban Banks of Maharashtra and Goa, and Maharashtra State Co-operative Bank on November 14 to resolve the crisis arising out of non-availability of loans to nearly a dozen sugar factories in the State due to cancellation of Apex Bank's license.

The first meeting held on November 7 did not yield any results as top RBI officials could not attend it due to a board meeting.

The license of Mumbai-headquartered Apex Bank, which is registered under the Multi State Co-operative Act, 1984, was cancelled by the RBI on Supreme Court's directive on October 30.

The SC, on October 29, upheld the MSC Bank's contention that unless a cooperative society is a state co-operative bank or a central co-operative bank or a primary co-operative bank (as defined under the NABARD Act), no license can be issued.

With Apex Bank no longer in a position to extend finance for the cane crushing season, the union minister of state for finance is seeking to work out a bailout for the 12 factories.

Anandrao Adsul, union minister of state for finance, suggested that the Apex Bank's loan portfolio pertaining to the 14 sugar co-operative factories could be picked up by the MSC Bank after through due diligence.

The Apex Bank lead consortium of banks had an exposure of Rs 365 crore (includes working capital and term loans) to these factories. Out of the Rs 365 crore exposure, Apex Bank's share is Rs 115 crore.

MSC Bank has indicated its willingness to take over Apex Bank's sugar factory loan portfolio provided the RBI and Nabard relaxed sectoral caps pertaining to sugar factory financing.

Further as per the Nabard and RBI stipulation, MSC Bank can hope to finance factories from the apex bank stable only if they (factories) can get a state government guarantee.

As of March-end 2003, out of its total advances of about Rs 8,908 crore, MSC Bank's exposure to the sugar sector was Rs 4,476 crore.