6 co-op banks may be forced shut despite Cong-NCP push | mumbai | Hindustan Times
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6 co-op banks may be forced shut despite Cong-NCP push

mumbai Updated: Oct 25, 2012 01:18 IST
Ketaki Ghoge
Ketaki Ghoge
Hindustan Times
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Despite the state government’s petition to the Centre for more leeway, the six district co-operative banks that are in the red may have to down shutters.

The closing of these banks will jeopardise the sole credit line to farmers in Maharashtra’s suicide and tribal belt. The Reserve Bank of India (RBI), in an official communication to the state government last week, pointed out that the banks have “failed to fulfill criteria” laid down by the apex bank and will have to face legal action.

The banks controlled by ruling Congress and Nationalist Congress Party (NCP) heavyweights had till September 30 to improve their negative net worth and minimum capital adequacy ratio, which have resulted from mismanagement.

Though Chief Minister Prithviraj Chavan was reluctant to dole out Rs551-crore bailout package to these banks, he joined hands with NCP chief and Union agriculture minister Sharad Pawar to petition the Centre to extend the deadline by another six months.

The state has also sought the pending Rs900 crore due to Maharashtra under the Vaidyanathan package as a bailout from the Centre for these banks.

“We are in touch with RBI authorities after this letter, and have pointed out that the issue had been flagged at the highest level and the Centre is considering an extension, as well as a package. It’s not the question of just six banks of Maharashtra; there are 20 banks in the country that may be shut down and hence we are hoping for some way out,” said a bureaucrat on condition of anonymity.

However, the RBI has already given these banks two extensions, and the Centre has not yet assured any help to the state government.

Sources told HT that the Centre is unlikely to hand over the Rs900 crore. “The finance ministry has pointed out that the Vaidyanathan package lapsed in 2010.

Secondly, this package was promised to banks for modernisation and carrying out reforms, not to bail them out for bad lending. The government is in tight corner on the issue,’’ said a government source.

Sources in the government said that while three banks — Jalna, Osmanabad and Wardha — may be in a position to improve their net worth within three months, the remaining three banks – Nagpur, Dhule-Nandurbar and Buldhana — are unlikely to do so.