Friday 8 June 2012

[www.keralites.net] Beware of Co-Operative/Urban Banks

 

In view of the precarious financial position of the co-operative bank, a Show Cause Notice (SCN) dated March 16, 2012 was issued asking it to show cause as to why the license granted to it to carry on banking business in India under Section 22 of the Act should not be cancelled. The co-operative bank in its reply dated April 18, 2012 to the SCN accepted that the precarious financial position of the co-operative bank which was attributed to the fraud amounting to ` 1200.00 crore committed on the co-operative bank by the share broking community including Ketan Parekh and his associates in collusion with the then members of the Board of Directors. As per the bank, an amount of ` 803.00 crore constituting 72% of the total advances were unsecured due to unenforceable securitiesand defective documentation and hence not recoverable. The co-operative bank also accepted that the Reconstruction Scheme failed due to non-fulfillment of commitment of UCBs to contribute to the Revival Fund because many UCBs feared for the safety of their moneys and even the amount of ` 343.36 crore was returned in terms of CRCS notification of April 2008 on the representation made by the co-operative bank and petition filed by them before the Gujarat High Court. The Board of Administrators through a resolution left it to RBI to decide the future set up of the co-operative bank. Thus the co-operative bank accepted all the irregularities / deficiencies observed in the SCN issued for cancellation of licence.

www.keralites.net

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