The story of the state's apex co-operative bank is one of politicians sanctioning huge loans to sugar co-operative factories controlled by party colleagues and other leaders in violation of all financial and banking prudence.
The accumulation of these bad loans as non-performing assets largely led to the bank's negative net worth of Rs 144 crore. That's the gist of the statutory audit report of the troubled Maharashtra State Co-operative Bank (2009-10) that led to the Reserve Bank of India superseding the board of directors on Saturday.
Even as the Nationalist Congress Party (NCP) that has been dominating the bank for more than a decade feigns outrage at the action, the report (a copy of which is with HT) slammed the bank's credit disbursements and downgraded its performance to D grade in 2010. Both ruling alliance Congress and NCP politicians are to blame for the mess.
The report states that the bank's overexposure to the sugar sector at around 40% had led to the accumulation of bad loans and increased non-performing assets of the bank. It has pointed out that 14 directors from the board (all politicians) are on the loan committee that sanctions loans.
All 44 directors of the bank are politicians - 25 from the NCP, 14 from the Congress, two each from BJP and Peasants and Workers Party (PWP) and one from the Shiv Sena.
Till 2010, the bank had invoked government guarantees of Rs 1,892 crore as sugar co-operatives have defaulted on loan payments. Despite this, loans were sanctioned even to those mills that had negative worth.
The beneficiaries were sugar co-operatives and spinning mills controlled by politicians from the ruling alliance.
The bank also sanctioned financial assistance of Rs 724 crore to 22 sugar co-operatives to start co-generation projects. The auditors have commented that their opinion based on reality indicates that these loans were given in the absence of "financial and technical feasibility of all these co-generation plants which will create trouble in the future". The report also noted that the sugar factories were using funds for purposes other than mentioned in the loan application and the monitoring of loan recoveries was pathetic.
From 2003, the bank had sent notices to more than 33 sugar factories (all politically controlled) under the Securitisation Act to recover dues by attaching properties but no action was taken against any of these factories.