The Reserve Bank of India (RBI) has superseded the board of city-based Western Co-operative Bank.
The central bank is likely to issue a show-cause notice soon asking why the bank's licence should not be cancelled in view of the financial irregularities which have come to light.
The RBI has found that the Andheri-based single-branch bank, which was floated a couple of years ago, has advances in excess of its deposits. As against deposits worth around Rs 9 crore, the advances portfolio of the bank stands at around Rs 10 crore, according to banking industry sources.
The co-operative bank had, without proper sanction of either the board or the investment committee, allegedly over-stretched itself by issuing guarantees , letters of credits and co-accepted bills aggregating around Rs 25 crore.
A retired RBI general manager was one of the directors on the bank's board. The Maharashtra government has appointed V V Rasal from the office of the Registrar of Co-operative Societies as an administrator to manage the affairs of the bank for the time being.
The central bank looked into the co-operative bank's functioning following depositors' complaints that they were facing problems in withdrawing funds. The banking sector regulator, during its inspection, had come across problem accounts and letter of credits.
"The Western Co-operative Bank has become a problem-bank and the RBI's legal department is looking into the issue of whether a show-cause notice seeking revocation of its licence should be issued," central bank sources said.
