Even as a political slugfest has broken out in the corridors of Mantralaya over the dismissal of the board of directors of the Maharashtra State Cooperative Bank (MSCB), the fact is the bank is indeed in poor health.

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This is more than evident in the 265-page inspection report of the National Bank for Agriculture and Rural Development (Nabard), based on which the Reserve Bank of India (RBI) dismissed the board of directors of the bank.

The Nabard report (a copy of which is in the possession of DNA) pulls no punches and tells the story as it is. The most damning indictment by Nabard is that the MSCB (formed on May 1, 1961) is an unlicensed bank. This is because the bank is unable to maintain the 4% capital-to-risk weighted asset ratio (CRAR) as prescribed by the RBI.

This is just the tip of the iceberg. There are several glaring omissions on the part of the bank which the report elucidates clearly.

According to Nabard, the bank should have recorded a loss of Rs1,014 lakh for 2008-09, instead of a profit of Rs1,778.2 lakh, had they truthfully made a requisite provision as per the income recognition, asset classification (IRAC) norms.

Nabard said MSCB had not declared a dividend in 2008-09 and hence it was wrong for it to appropriate Rs300 lakh towards the centenary year celebrations of the cooperative movement in 2010.

Slamming the bank for a sharp deterioration of its net worth, the report pointed to the whopping 31% of non-performing assets (NPA) with the bank. The Nabard report criticised the bank for camouflaging the NPAs by violating norms and not reflecting a true picture of its financial position as on March 31, 2010.

“Rs66,390.50 lakh pertaining to NPAs and Rs8,035.91 lakh pertaining to overdue interest receivable was removed from the balance sheet, thereby camouflaging the NPA position,” the report said.

Highlighting the steep decline in profitability of the bank (Rs24.31 crore in 2007-08 to Rs2.87 crore in 2009-10), the Nabard report criticised the bank for “camouflaging of provisioning requirements and not providing certain items of liabilities and frequent use of general reserve fund for the purpose of arriving at profit.”

The Nabard report exposed how the bank indulged in frequent replacement of vehicles, purchase of a costly vehicle for the managing director, deployment of additional vehicles for chairman/ vice-chairman, providing vehicles to state minister of cooperation without any request, allowing use of banks’ vehicles by directors and staff for personal purpose at subsidised rates and payment for fancy vehicle numbers have hurt the bank.

The report said Rs75,000 and another Rs22,500 was spent on getting fancy number plates for two Skoda Superb cars for the bank’s chairman and vice-chairman respectively on July 19, 2010.