The Nagpur, Buldhana and Chandrapur district cooperative banks — which were on the verge of insolvency — have got new lease of life, in the form of a Rs 150-crore revival package from the Union government.
The RBI had served the banks dissolution notices, after they were involved in multi-crore scams, allegedly orchestrated by directors of the banks. By deciding to infuse fresh life, the Union cabinet has revived hope for their survival.
In its Cabinet meeting on Thursday, the Union government decided to dole out Rs 2,375.42-crore to revive 23 district cooperative banks in four states. Of the total amount, the state government will receive Rs 1,464.59-crore.
The three banks have a deposit base of about Rs 5,839-crore and pending loans of around Rs 3,774-crore. The government wanted to revive them because people from the economically weaker sections of society and small businessmen have deposits in these establishments.
The Union government’s share will be released through NABARD as interest-free loan, and be converted into a grant if all the conditions outlined in the scheme are fulfilled.
All three banks were on the verge of insolvency because of financial irregularities by their respective boards of directors, many of whom are politicians. In the Rs 150crore Nagpur District Central Cooperative Bank (NDCCB) scam, Congress MLA Sunil Kedar is the main accused. Findings of the state cooperatives department mentioned that it was due to him that the bank was plunged into a financial mess.
The cooperatives department found Kedar, the bank’s former chairman, guilty, and ordered him to deposit Rs 129.31 crore with 12% interest per month, which collectively stands at Rs 300-crore. The scam was exposed in 2002. The cooperatives department also found the general manager Ashok Chaudhary and other directors of NDCCB guilty in the scam. The investigating officer, in his probe report, recommended that legal action be taken against the guilty, if they fail to deposit the money.
However, neither did the government recover the amount from Kedar and nor were they arrested for the fraud. Kedar invested the NDCCB money in gilts through Mumbai’s Home Trade. After getting back the investment, the bank invested the money for purchasing government bonds, but the money never came back.
In Wardha district central cooperative bank, NCP leader and MLA Suresh Deshmukh, who was the chairman of the bank, resorted to the same tactics, depositing Rs20-crore in a dubious Mumbai-based investment company. The company gave loans to his cooperative sugar and cotton mills, which have not been recovered so far, and are responsible for the bank’s deplorable financial condition.
In Buldhana, former Maharashtra minister and senior NCP leader Rajendra Shingne was the chairman of the bank where financial irregularities worth more than Rs 500-crore were detected, plunging the bank into its financial crisis.