Dharwad co-op bank in soup

The failure of Karnataka Central Cooperative (KCC) Bank to recover the outstanding dues of Rs 357 crore has sent co-operative banks in three districts of North Karnataka into a tizzy. The KCC Bank is the district central co-operative bank for Dharwad, Gadag and Haveri districts.

The bank, one of the first in the co-operative sector in the region, had been the backbone of agricultural finance for decades.

Several primary co-operatives and urban co-operative banks were being supported by KCC Bank. But that is a thing of the past. Mismanagement and misappropriation by successive boards of directors has landed the pioneer bank in a soup. Going down with it are the primary co-operative societies and the urban co-operative banks which too are in deep trouble.

Hundreds of depositors had their savings in KCC Bank hoping to get better returns. With the bank failing to recover the dues, Nabard refused refinancing. Most of the loans from KCC Bank are to institutions managed by politicians.

The loans in many cases have been sanctioned and disbursed without obtaining proper security. The bank ran into difficulty when these institutions turned defaulters five years ago.

The bank staff who had not been paid went on strike and work in the bank came to a standstill. The then minister D K Shivakumar appointed an administrator to step up recovery.

Coercion by the bank staff for recovering loans faced resistance from the farmers already reeling from successive drought conditions. The political heavyweights ensured the recovery officers did not touch them.

The promise by the then minister H Vishwanath and his cabinet colleagues to bail out the bank has not materialised. Vishwanath had announced a package of Rs 50 crore but nothing has come so far.

While the primary co-operative societies were hit immediately, it took two years for the urban co-operative banks in the three districts to make the grade. Sensing trouble, some urban co-operative banks withdrew their funds from KCC Bank and transferred them to safer places.

But others were not so lucky. With a huge amount of their deposits blocked with the KCC Bank, these urban banks were unable to repay the depositors.

The Maratha Urban Co-operative Bank, Vardhaman Co-operative Bank, Gurusiddheshwar Co-op Bank and several others have been winding up their business gradually.

The depositors are being paid in small sums. Some of these banks have taken shelter under Reserve Bank of India's rule, which restricts repayment of deposits to only Rs 1,000 per month to a depositor.

Several pleas to the state government to revive the KCC Bank have not yielded any result. The lack of political will to help the bank and internal squabbling among the politicians of the region has also come in the way of the bank's recovery.

The depositors and chairpersons of urban co-operative banks have formed an association and are fighting for the revival of the bank. Dharwad MLA Chandrakant Bellad has urged the state government to release Rs 100 crore to KCC Bank. It is to be seen if the bank will see revival during the Dharam Singh regime.