The Central government today gave in-principle clearance to a Rs 800 crore revival plan for the stock scam-affected Madhavpura Mercantile Cooperative Bank.
The Centre will stand guarantee for 70 per cent of the amount, with the balance to be assured by the Gujarat government.
The package was finalised in a meeting attended by home minister LK Advani, finance minister Yashwant Sinha, agriculture minister Nitish Kumar, textiles minister Kashiram Rana and Gujarat Chief Minister Keshubhai Patel.
Announcing the package, Patel said that the Rs 800 crore fund will be pooled in by state co-operative banks, which will deposit the money in government securities. The money will be lent to MMCB at 7.5 per cent rate interest.
Co-operative banks, which have already invested around Rs 600 crore, will not withdraw their deposit for a period of up to six years. Also, the Deposit Insurance and Credit Guarantee Corporation of India will release Rs 464 crore for repayment to small depositors covered under the insurance scheme.
A source who attended the meeting told Business Standard that the Ahmedabad Co-operative Bank is expected to invest around Rs 200 crore.
Sources also said that 70 per cent of the funds will be invested in government securities. It has also been decided that the new management will be headed by a Reserve Bank of India nominee and that co-operative banks contributing over Rs 50 crore will get a slot on the board.
The decision follows the recommendation of the committee appointed by the Central Registrar of Co-operatives, which had suggested the infusion of funds.
The Gujarat chief minister said that top priority would be given to repayment of small depositors, with deposits of less than Rs 1 lakh.
The bailout plan also stresses that the new management will take effective steps to ensure recovery of advances made to the various debtors, including big bull Ketan Parekh, Patel said.
