Prime Bank may take over 2 ailing banks

The Surat-based Prime Co-operative Bank has evinced interest in taking over two ailing co-operative banks in the state. These banks are the Surat-based Adajan Nagarik Sahakari Bank Ltd and the Vadodara-based Baroda Mercantile Co-operative Bank.

"Talks were on between the banks for some time. The board of directors of the three banks have given their consent to the move. We will send a detailed proposal to the state registrar, who will forward it to the Reserve Bank of India," said Prime Bank chief executive officer Vijay Parekh.

"Prime Bank will takeover the two co-operative banks if the government gives it's approval," he said.

Parekh said, "The co-operative banking sector of Gujarat, especially Surat, has witnessed horrendous times in the recent past. To save this sector stronger banks will have to take the lead. Since Prime Bank is financially sound, we have taken the initiative, and proposed to take over the two ailing banks."

"If we get the nod, our customer base would widen, which would mean more business. So even if our finances are strained in the short-term, and we might suffer losses initially, we believe the move would benefit us in the long term," he said.

"If after the takeover we are able to recover money from the difficult accounts of the banks, it is also likely that we might not have to suffer losses even in the initial period," Parekh said.

He also said the sole aim of the co-operative banking sector is not profits, but to be in a position where it can contribute to the society.

By taking over the two banks, Prime Bank would not only increase business, but also fulfill it's social obligation, he added. Prime Co-operative Bank is an urban co-operative bank with 13 branches. Nine of the bank's branches are in Surat city, while the remaining four are at Bardoli, Bharuch, Billimora and Navsari. The total deposits of Prime Bank are in the region of Rs 128 crore.

Adajan Nagarik Sahakari Bank suffered losses of around Rs 3 crore due to the Home Trade scam. Though the bank is functioning, experts say it is in bad shape. Around an year back Surat Peoples Co-operative Bank had proposed to takeover Adajan Nagarik Bank, but backtracked at the last moment.

In October 2002, Baroda Mercantile Co-operative Bank had witnessed panic withdrawals owing to the withdrawal of clearing house operations. Its advances were at around Rs 8 crore against deposits worth Rs 6 crore at that time.