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RBI warns it may cancel MMCB licence

It issued a show-cause notice to the board of administration last week seeking clarification on why the bank's licence should not be cancelled.

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RBI warns it may cancel MMCB licence
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In yet another jolt to the crisis-ridden Madhavpura Mercantile Cooperative Bank (MMCB), the Reserve Bank of India (RBI) has threatened to cancel the licence of the bank. It issued a show-cause notice to the board of administration last week seeking clarification on why the bank's licence should not be cancelled.

Sources said that the RBI issued a notice to the board of administration and asked it to explain the reason for the same. It seems that the apex bank of the country is not pleased with the progress of the bank under the current board of administration chaired by former IAS officer Radha Singh.

The bank has been able to recover only Rs3 crore from defaulters against the total dues of more than Rs1,100 crore and negative net worth of Rs1,347 crore as on March 31, 2011. Sources also said that RBI has given a period of one month to the board for improving the bank's performance. The board's term was extended for six months on February 23, 2012.

In case the bank's licence is cancelled, the financial institution will go into liquidation and the state government will appoint liquidator under powers rested with the Central Registrar of the Cooperatives, said sources.

The bank needs to pay around Rs100 crore to individual depositors and Rs617 crore to 67 cooperative banks in the state. Earlier, it was apprehended that 30-odd banks would be affected in case MMCB goes into liquidation. However, now around three banks need to worry and they have been given time of six months to increase their share capital in order to survive.

However, bank authorities have denied providing any information about the development. Radha Singh, chairperson of MMCB board of administration, said that she did not have any news regarding the same as she was out of station and asked to contact local authority at the bank. When contacted, chief executive officer of MMCB, BKR Maruthy, said: "It is a privileged communication between the regulator and the bank and I cannot disclose any information regarding this."

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