Metro Bank told to submit action plan for revival

The Reserve Bank of India (RBI) has asked the city-based Metro Co-operative Bank, which is facing a liquidity crunch, to submit an action plan for its revival.

"We had written to the RBI, seeking lifting of restrictions placed on us since October 21. We had also sought permission to double the withdrawal limit from the current Rs 500," said Metro Bank chief executive officer Rajendra Thakkar.

"In response to our plea RBI has told us to submit a plan for improving the financial position of the bank, and how we would achieve the target within six weeks. We will shortly submit the action plan, which would mainly focus on the recovery the bank has made so far, and the fresh deposits the bank could attract, if the restrictions are lifted," Thakkar said.

"Since the day the bank was caught in a crisis, our staff has been visiting defaulters, asking them to repay their loans. If there is no response from them, the staff organise street plays or play musical instruments or indulge in similar acts outside their residence or offices. This method has proved effective, as many defaulters have either repaid or have assured to do so in the near future," a Metro Bank official said.

"We have recovered approximately Rs 1.50 crore worth loans. We have served recovery notices and initiated legal proceedings against some of the defaulters. We are hopeful that the bank will be able to recover a major portion of the outstandings in the coming months," he added.

Industry sources said RBI had conducted an inspection of Metro Bank between October 18 and 30.

According to RBI norms, the capital to risk assets ratio (CRAR) of any urban co-operative bank should be a minimum nine per cent.

However, according to the inspection report, the CRAR of Metro Bank is -27.1 per cent. The RBI has advised the bank to improve this to above 50 per cent of the stipulated level in six months, which industry experts say is an uphill task.

The report says that Metro Bank is not complying with Section 11 (1) of the Banking Regulations Act, 1949. RBI has asked Metro Bank to apply for exemption from the provisions of this section to the Central government.