Prudential's staff union moots merger

The Prudential Co-operative Urban Bank's liquidator, who has been appointed by the State Registrar of Co-operative Societies (RCS), said that he will take the merger proposal of the bank as requested by the employees union to the state government.

The Reserve Bank of India (RBI) recently had cancelled the city-based co-op bank's licence stating that there was no improvement in the financial position of the ailing bank.

It may be recalled that the apex bank had made the State Registrar of Co-operative Societies supersede the Prudential Bank board, after suspending the co-operative bank's operations in March 2003 under Section 35A of the Banking Regulation Act 1949, as applicable to the co-operative societies.

The bank had reportedly misled the RBI on the state of non-performing assets (NPAs), cash reserve ratio (CRR) and advances. Due to poor statutory liquidity ratio (SLR) and CRR, the liquidity position of the bank was found to be extremely critical.

The bank turned sick after lending heavily to risky sectors like commercial construction companies. Most of the advances were granted in the form of overdrafts and not loans.

Speaking to Business Standard, Amarender Rao, managing director of Andhra Pradesh State Co-operative Union, said: "The union has asked the bank not to be liquidated as the chances of recoveries are bright and have requested me to forward a proposal to the government on the possibility of merging Prudential with any other bank, which I will do at the earliest."

He also said that the assistance of all the employees of the bank would be taken up in speeding up the recoveries. "My first task is to review the assets and liabilities of the bank and submit a report to the government," he said.

Speaking about the recoveries, he said, "Till now the government appointed only three sales officers but now I will ask for more sales officers and with the help the employees of the bank try to recover whatever is possible," he said.

He also said that all the 344 employees would be on rolls for the present. "The employees have some grievances, which I will clarify with them and we will try to open all the branches from Friday," he said.

Rao said that he would speak to the registrar and the government on what could be done about paying the due amounts of up to Rs 20,000 to depositors. "The government has put a ban on all the payments till February, but I will try to get this lifted and continue the payments to the depositors," he said.

Meanwhile, the employees and depositors alleged that big defaulters and some politicians close to the Congress forced the RBI to get the licence cancelled.

According to the union, the bank has repaid Rs 66 crore to the depositors and currently has cash to the tune of Rs 105 crore. While the amount recoverable stands at Rs 532 crore, the bank still needs to repay Rs 275 crore of deposits.

The large defaulters alone, around 25, account for around Rs 210 crore of the NPAs. The union also said that recoveries to the tune of Rs 187 crore were made during the last two years as proof of their capabilities.

The RBI, which had made the RCS supersede the Prudential Bank board in March 2003 and run the bank in view of its failure to maintain the stipulated statutory liquidity ratio (SLR) and cash reserve requirement (CRR) levels, said the decision to cancel the licence was taken after being satisfied that there was no improvement in the financial position of the bank two days back.

Union general secretary, B George Reddy, said, "The bank is a viable entity and has good potential for takeover, merger and other rehabilitation packages. The revival of the bank can be expedited by introducing further concessions to borrowers who were willing to clear their dues."

"The strength of the team working from April 2003 is the recovery of bad debts. Only Rs 97 crore was recovered till December 2003 and by June 2004 the amount went up to Rs 160, which currently is Rs 187 crore. This shows our potential," he said.

One of the depositors, K Navaneetha Krishna said that the RBI through the bank should have intimated us in advance and should have taken our opinion. "I think the move is politically motivated and uncalled for as the bank had asked for time to recover its bad debts," he said.

Another depositor said, "This is the second time that the RBI is doing things in such a manner. Some months back, the RBI declared moratorium on Global Trust Bank and within a couple of days announced that it would be merged with Oriental Bank of Commerce."