Diamond Bank licence revoked

Reserve Bank to appoint liquidator shortly; depositors hopeful of getting money back

The Reserve Bank of India (RBI) has terminated the licence of the beleaguered Surat-based Diamond Jubilee Co-operative Bank.

Industry sources say that this is the first step for taking the bank towards liquidation. The RBI is expected to appoint a liquidator shortly.

The termination order has been issued under the Banking Regulation Act 1949 Section 5 (b)(c) and 49 (a). The order was issued on June 19, and notices were placed outside Diamond Bank's main branch at Salabatpura on Tuesday. The state co-operatives department has also been intimated about the same.

A show-cause notice as to why Diamond Jubilee Bank should not be closed down, was issued by RBI on March 8 this year.

Diamond Bank filed a reply on March 30, but the apex bank found it unsatisfactory, which has led to the termination of the bank's licence.

Diamond Jubilee Bank has around 85,000 depositors with deposits of around Rs 108 crore. Almost 70 per cent of these depositors have deposits of under Rs 1 lakh, which are insured by the Deposit Insurance & Credit Guarantee Corporation.

Following the order, the bank's depositors are now hopeful of getting their monies back shortly.

A member of Diamond Bank's depositors association said, "We have been fighting since a long time for getting our monies back, but all our efforts have gone in vain. Now with RBI paving the way for liquidation of the bank, we are confident that we will get our entire deposits back."

The 179 employees of Diamond Bank, who were retrenched in February earlier this year, too are pleased because of the decision.

Natu Patel, Bank Kamdaar Sangh president, said: "We are hopeful that the employees will get their entire dues, which are in the region of Rs 8 crore in the near future."

Meanwhile, the Gujarat Co-operatives Registrar, B K Gupta, is learnt to have assured the depositors and retrenched employees of the bank that steps will be taken to repay their dues shortly.

He has also assured that strict steps would be taken against defaulters to recover dues from them.

Diamond Jubilee Co-operative Bank went out of business on August 29, 2002, and was suspended from clearing operations the next day.

Police complaints were registered against several defaulters, including the prime accused, C R Patil.

Patil, who is a prominent BJP leader, had assured repayment of the bank loan by selling his land and other properties.

A three-way memorandum of understanding was signed by Patil, the bank and the Ahmedabad-based Shri Saumya Constructions, for purchase of Patil's land at Sachin.

But the agreement got stuck due to technical reasons. The employees and depositors of Diamond Bank also met Gujarat Co-operatives Minister Bhupendrasinh Chudasma and others seeking resolution of the issue, but there was no headway.

With the termination of the bank's licence, the issue is expected to be settled shortly.