MMCB gets one year breather

Centre extends revival packagetill august 2005

The crisis-hit Madhavpura Mercantile Co-operative Bank has received a fresh lease of life, with the Central government extending the time frame of its revival package by a year.

The original revival package period for the bank was scheduled to end on August 24, 2004.

With its recovery of dues not too impressive, MMCB faced the danger of being shut down. Several banks have deposited over Rs 250 crore with it as part of the revival package announced in 2001. Many of these smaller co-operative banks would also have been hit adversely.

According to the original revival package, MMCB was supposed to start paying back depositors having deposits of over Rs one lakh in installments. This procedure was supposed to begin by the end of this month. But, with the one-year extension, MMCB will have more time to recover dues and strengthen its financial position.

The extension of the time frame of MMCB's revival package comes in the wake of two rounds of meetings that MMCB and state government officials had with Union finance minister P Chidambaram, Union co-operation minister Sharad Pawar and officials of the Reserve Bank of India (RBI) and the Central Registrar of Co-operatives.

While the Union government rejected a grant request of Rs 500 crore that MMCB sought for revival, it extended the deadline for the package.

While MMCB chairman Jairam Patel, Congress leader Narhari Amin and other MMCB officials had visited Delhi on August 2, chief minister Narendra Modi, state co-operatives minister Bhupendrasinh Chudasama and minister of state for home Amit Shah visited Delhi on August 13.

Then, on Monday, state co-operatives minister Bhupendrasinh Chudasama and other MMCB officials again met officials of the Union finance ministry.

MMCB chairman Patel said that, while the bank had sought a longer time frame for the revival, it will do all it can to revive itself in the next one year.

"MMCB will not be required to disburse any funds for the next one year at least. In the meantime, we will try and strengthen our recovery process although it will be very difficult to say how much more recovery can be made," he said.

While the bank has recovered around Rs 250 crore from defaulters over the past three years, it has not managed to recover a majority of the dues. As far as dues of Ketan Parikh are concerned, MMCB has recovered just Rs 22 crore instead of the Rs 380 crore, that he owes the bank.

The RBI had suspended MMCB from the clearing house in March 2001, after a preliminary inquiry revealed that the bank was facing a major liquidity crunch and was in the eye of the pay order scam involving Ketan Parikh.

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The Madhavpura story

• October 10, 1968: Madhavpura Mercantile Co-operative Bank (MMCB) formed.
• Late 1990s: Bank gets scheduled bank status.
• March 8, 2001: Depositors make a run on the bank following reports that it had lent a huge sum to Ketan Parikh.
• March 12, 2001: RBI suspends MMCB from clearing house.
• August 2001: Revival package announced for bank. To be implemented over three years till August 24, 2004.
• October 2003: RBI directs MMCB to speed up recovery of dues from defaulters.
• August 2, 2004: MMCB team visits Delhi, seeks Rs 500 crore grant, which is rejected.
• August 13: State government team visits Delhi to extend revival package.
• August 16: Team visits Delhi again. Central government agrees to extend revival package by a year, until August 24, 2005.