Bankers divided over deposit insurance to multi state co-ops

Extending its support to multi state co-operative banks in the state, the Gujarat Urban Co-operative Banks' Federation (GUCBF) has said the Supreme Court judgement delivered about a year ago in the Apex Bank of Maharashtra and Goa case regarding licencing does not apply to multi state co-operatives in the state.

Hence, the question of these banks not having insurance cover of the Reserve bank of India subsidiary Deposit Insurance And Credit Guarantee Corporation (DICGC) does not exist, the federation said.

The federation president C D Patel said the Supreme Court judgement in the case regarding the Apex Bank of Maharashtra and Goa applies to just that bank and this cannot be extended to other banks.

"The Supreme Court order on whether there can be more than one state co-operative bank in a state has been discussed earlier and this has nothing to do with multi state co-operative banks," Patel said.

The federation said all multi state co-operative banks of the state have been paying insurance premium to the DICGC and this has been accepted even by the Reserve Bank of India.

Thus, all depositors of multi state co-operative banks are insured under the DICGC, Patel said.

The body said the central government has been thinking of amending the existing rules and regulations, following the Supreme Court judgement in the Apex Bank of Maharashtra and Goa case.

The federation and the National Federation of Urban Co-operative Banks and Credit Societies , New Delhi, have made several recommendations in this regard, a federation statement said.

However, sources in the banking industry here said irrespective of the Supreme Court judgement, multi state co-operative banks in the state have been collecting deposits from people without an insurance cover from the DICGC.

Sources said the DICGC, in a circular issued to multi state co-operative banks, had asked them to provide information on the insurance premium that they have been paying to DICGC.

"Even if they are paying insurance premium to the DICGC, this does not mean that the depositors are covered under the insurance because there is the question of whether there is a licence or not," said a source in the banking industry.

The co-operative banking sector in Gujarat is divided over whether multi state co-operative banks have a licence or not, in view of the Supreme Court ruling.

Even officials of multi state co-operative banks state that there is room for different interpretations of the ruling and it is learnt that the RBI has taken up the matter with the central government.