RBI orders liquidation of Raghuvanshi Bank

The Reserve Bank of India (RBI) has ordered liquidation of Mumbai-based The Raghuvanshi Cooperative Bank, which was under a moratorium since August 2002.

RBI said it ordered cancellation of banking licence of Raghuvanshi Cooperative Bank on March 18, 2005 as the bank ceased to be insolvent.

The Maharashtra commissioner for cooperation and registrar of cooperative societies has been asked to appoint a liquidator for winding up of the cooperative bank.

Raghuvanshi Cooperative Bank was one of the many cooperative banks which were duped by brokers by not delivering government securities to the banks against payments received. Raghuvanshi Cooperative Bank was cheqted of Rs 5.40 crore.

All the depositors of Raghuvanshi Cooperative Bank are eligible to get their claims up to Rs 1 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC). RBI said the liquidator is required to expeditiously send the claims of all depositors to DICGC. DICGC will attempt settle depositors' claims within about 90 days.

In 2004, Maratha Mandir Cooperative Bank and South Indian Cooperative Bank, both Mumbai-based, were put under directives by RBI following large withdrawals of deposits on rumours of the banks being in financial doldrums.

The two banks still continue to be in the woods. A string of cooperative banks including Madhavpura Cooperative Bank, Wardha District Central Cooperative Bank, Osmanabad District Central Cooperative bank and Nagpur Cooperative Bank has collapsed in 2001-2002.

The Raghuvanshi Cooperative Bank was placed under directions on August 29, 2002, in view of serious liquidity crunch. An inspection as on December 31, 2002 revealed the bank's precarious financial position.

The bank had requested for some time for revival. But the next statutory inspection by RBI as on June 30, 2004 revealed further deterioration in the bank's financial position and brought out several deficiencies and irregularities in its functioning.

A show cause notice was issued to the bank on September 28, 2004 advising it to show cause as to why the licence granted to it for carrying on banking business should not be cancelled.

RBI had found serious violations of RBI guidelines and the bank had negative net worth, negative CRAR, high NPAs and significant erosion of deposits.

The recurring collapses among cooperative banks has prompted calls for tighter norms for expansion of their balance sheets. A consultation paper released recently by RBI has sought to restrict cooperative banks' deposits. It has proposed a capital to deposits ratio of 15 per cent.