Urban co-op banks oppose to federation's stand on MMCB

Urban co-operative banks in the state are unhappy over the stand taken by the Gujarat Urban Co-operative Banks' Federation (GUCBF), the umbrella body of over 350 urban co-operative banks, regarding the Madhavpura Mercantile Co-operative Bank issue and the fact that it is being headed by persons who are directors of weak co-operative banks.

Co-operative banks say while several co-operative banks had deposited money with MMCB after being offered higher rate of interest, the federation has supported the move of MMCB to repay the deposits with lower interest, thus affecting the banks.

The banks also say this decision was taken unilaterally without consulting the members.

Said a prominent banker of Ahmedabad, who is also a member of the federation, "The state of affairs in the federation is evident from the fact that while the chairman is also the director of a weak co-operative bank, the vice chairman is a director of the MMCB, which is in a bad shape."

He said with the politicisation of the co-operative banking system, functioning of the federation has worsened. While the federation chairman C D Patel is a director of Petlad Co-operative Bank, vice chairman R S Patel is a director of the beleaguered MMCB.

The managing director of another urban co-operative bank said the decision of the federation to advocate reduction of interest that MMCB has to pay co-operative banks who have deposits with it was unilateral and the banks were not taken into confidence.

"How can the federation just seek approval from the government for interest rate reduction? After all, we are answerable to our depositors," the banker said.

MMCB and the federation had sought approval from the RBI for slashing the interest rate on deposits of banks from seven per cent to 4.5 per cent.

This means that banks who have deposits with MMCB will get lesser interest amount on their deposits, as and when the money is repaid to them.

Federation chairman C D Patel, who is also an MLA from Petlad, however, said no chairman or director of co-operative banks of the state can claim not to have any political connections.

"It is true that there has been politicisation of the co-operative banking sector, but there is not even one director of a co-operative bank without political leanings. And as far as my bank (Petlad Co-operative Bank) is concerned, it went weak because of the crisis in MMCB and Charotar Nagarik Sahakari Bank," Patel said.