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FinMin ?no? to restoring licence

UNION FINANCE Ministry has refused to restore the banking license of Maharashtra Brahman Sahkari Bank Limited, Indore, which was de-licensed in September 2004 for committing financial irregularities, conducting non-banking business and failing to maintain the liquidity ration prescribed under Reserve Bank of India guidelines issued in 2001.

india Updated: Sep 15, 2006 14:41 IST

UNION FINANCE Ministry has refused to restore the banking license of Maharashtra Brahman Sahkari Bank Limited, Indore, which was de-licensed in September 2004 for committing financial irregularities, conducting non-banking business and failing to maintain the liquidity ration prescribed under Reserve Bank of India guidelines issued in 2001.

The Ministry has issued these directives to RBI, sources said. As a result, the Ministry’s appellate court in New Delhi is expected to dismiss the Bank’s appeal to restore its licence at the hearing scheduled on October 18, 2006.

The Bank, which is under liquidation and whose status has been reduced to a cooperative society after RBI cancelled its banking licence, has filed an appeal for its restoration to facilitate its merger with Nagpur Nagarik Sahkari Bank Limited (NNSBL) and not to run it.

With all doors closed, the only hope for the cooperative society is the NNSBL annual general meeting scheduled on September 20. The AGM is likely to ratify proposal to take over the Maharashtra Brahman Sahkari Bank along with Hindu Nagarik Sahkari Bank Limited, Indore.

On passing the two merger proposals, the RSS-dominated multi-state scheduled cooperative bank with 27 branches in Maharashtra will send them to RBI by September 30. Reserve Bank merger guidelines 2005 say that a multi-state scheduled cooperative bank cannot take over a cooperative society, which Maharashtra Sahkari Bank is.

Nonetheless, RBI has asked NNSBL to submit the amalgamation bid by October 19 on the ground that since Maharashtra Brahman Sahkari Bank’s appeal is already pending with appellate court in New Delhi, Nagpur cooperative would be granted banking licence.

“The banking licence would not be granted to Maharashtra Brahman Sahkari Bank, but to NNSBL for takeover in the interest of depositors. We would not have taken such a step had RBI not assured us of amalgamation,” Nagpur bank chief executive officer Dilip Mulmule remarked over phone from Nagpur.

NNSBL, which is keen to expand business in Madhya Pradesh and Chhattisgarh and will make entry into the State with proposed takeover, is being seen as a competitor to Cosmos Bank and Saraswat Brahman Cooperative Bank, which are also multi-state, scheduled cooperative banks.

Although both banks have applied for RBI licence to be upgraded as private commercial banks, NNSBL will be the third competitor in State till the two are elevated.

Meanwhile, the 22 staffers of Maharashtra Brahman Sahkari Bank have fixed hope on RBI and expect it to grant permit to NNSBL by Dussehra next month.

The staffers, who are getting only 70 per cent of their salary since January 2006, would be out of employment if the merger does not take place and once the liquidator completes recoveries.

“The picture will be clear by October-end,” Maharashtra cooperative manager Mukund Joshi said. He informed that it would be first instance in the country where a multi-state scheduled cooperative bank would take over a primary urban cooperative bank after it came under liquidation.