Dealing a huge blow to the politically strong cooperatives lobby, dominated by the ruling Nationalist Congress Party, the board of directors of apex cooperative bank, Maharashtra State Cooperative Bank, has been dissolved on the Reserve Bank of India’s recommendation.
The bank virtually controls all credit to the cooperative sector that forms the backbone of the state’s rural economy and has on its board of directors political heavyweights from the ruling alliance.
The VIP list includes deputy chief minister Ajit Pawar, former NCP minister Vijaysinh Mohite-Patil and Dilip Deshmukh, Congress leader and brother of Union heavy industries minister Vilasrao Deshmukh. For more than two decades, the bank has been dominated by politicians owing allegiance to NCP chief Sharad Pawar.
On Saturday, Pawar expressed unhappiness over the RBI action. He said, “All transactions of the bank had been going on smoothly, including recovery of loans. The RBI decision is not right. The board of directors disbursed loans to institutions only after the approval of the state cabinet. The state government had even given a warranty in all these matters.”
On May 4, the RBI recommended through its communication to the state government that the board be dissolved and replaced by two administrators.
The action comes as the bank celebrates 100 years.
Following the RBI directive, the board was dissolved under Section 110 of the Maharashtra Cooperatives Societies Act. The decision, which indicts the board of directors for mismanagement, was taken following an inquiry report by National Bank for Agriculture and Rural Development in February.
The report pointed to gross financial indiscipline and lack of financial prudence that left the bank with a negative net worth of Rs144 crore.
Some charges made in the report include fudging of balance sheets to show profit of Rs2 crore when the bank was facing losses of Rs798 crore.
“The board has been dissolved. Under the Act, administrators are given up to five years to ensure that the bank is properly managed,” Goel said.