The 75-year-old Ahmedabad People’s Cooperative Bank is in serious trouble.
The 75-year-old Ahmedabad People’s Cooperative Bank is in serious trouble. It may soon join the list of cooperative banks in the state that sank, thanks to some bad decisions by the management. The bank’s total deposits are at around Rs66.94 crore, while its advances, on Tuesday, stood at Rs48.80 crore. It has 51,632 account holders and more than 25,000 depositors.
Faced with a severe liquidity crunch, the bank on Tuesday asked the Reserve Bank of India to impose on it section 35 (A) of the Cooperative Banks Act. The bank has already stopped withdrawal of money by account holders and, from Tuesday onwards, all outward clearing processes at all its seven branches, too. The management has also decided not to accept new cash or fixed deposits.
The bank is facing a liquidity crunch as it had given Rs74 in loan without adequate collateral to one Pratik Shah of Hirak Biotech and Platinum Infotech, against a fixed deposit of Rs50 crore. Sources further said that as many as 372 people have duped the bank of Rs37.32 crore, thereby adding to its liquidity problem.
Following the imposition of section 35 (A), the account holders will be able to withdraw just Rs1,000 from a single account, and that too only once. The bank’s management says that the depositors will get back their money in installments once the bank overcomes its liquidity crisis.On why imposition of section 35 (A) is important, Nayan Majumdar, chairman of the bank, said, “We have asked the RBI to impose 35 (A) on the Ahmedabad People’s Cooperative Bank so that there are fewer restrictions on the bank. We are trying hard to recover the money and we expect the liquidity crisis to be over within a month.” Depositors, however, are sceptical of his assurance.
Leelaben Rabari, a customer who has deposited Rs1 lakh at the bank, accused the bank of rejecting the loan applications of common people, even after they had submitted all the necessary documents. “Influential people are able to get loans even without providing any security, thanks to the corrupt practices of the bank administration,” she alleged. She added that she was not sure when she would get her money back.
Meanwhile, the bank’s management is busy passing the buck for the crisis. Deepak Subodh, leader of the bank’s employees’ union, has lodged a complaint with the Crime Investigation Department against the bank’s chairman Nayan Majumdar and its managing director, Prahlad Chauhan, accusing them of fraud. The management, for its part, has already suspended one Pritang Desai for sanctioning the unsecured loan to Pratik Shah of Hirak Biotech and Platinum Infotech.
However, sources at the bank allege that Majumdar, who is currently the bank chairman, had played a key role when he was its managing director, in sanctioning the loan to Shah.Majumdar, however, said that the CEO, Rashmikant Kalathia, was responsible for sanctioning the loan to Shah.
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