Scam-tainted MSC Bank allowed to have transactions with govt

MSCB will now be allowed to have banking transactions with the state government’s departments and the agencies, boards and corporations under it. This permission was withdrawn about a decade ago when the Reserve Bank of India cancelled its banking licence

MUMBAI: The state cabinet on Thursday approved a proposal to allow the Maharashtra State Cooperative Bank (MSCB) to engage in banking transactions with the state government and its agencies. The proposal was moved by the finance department led by deputy chief minister Ajit Pawar, while the nod was given by the three ruling parties, including the BJP which, in the role of an opposition party, had slammed Ajit Pawar and the NCP for the massive scam in the bank.

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MSCB will now be allowed to have banking transactions with the state government’s departments and the agencies, boards and corporations under it. This permission was withdrawn about a decade ago when the Reserve Bank of India cancelled its banking licence. Although the bank regained its licence in January 2013, the state government did not allow its departments to engage in transactions with it. The bank has been under an administrator from May 2012 after its net worth recorded negative.

The cabinet, while finalising the eligibility criteria for banking transactions, made it mandatory for a bank to have transactions of more than ₹16,000 crore with nationalised banks, a capital adequacy ratio (CAR) of over 12 percent and no RBI restrictions on it. Since MSCB complied with these criteria, the bank has been allowed to transact with the government, the statement issued by the latter stated. MSCB’s net worth is over 4,000 crore, and it has been profitable as well as maintained an A rating for the last five years.

The government had withdrawn the approval given to district cooperative banks ten years ago after their capital-to-risk assets ratio turned negative. Before this, district councils and other government agencies were allowed to transact with cooperative banks. The district councils would release the salaries of government schoolteachers and their own employees through the banks.

MSCB was controlled by NCP leaders, including Ajit Pawar, during the Congress-led governments in Maharashtra. During the chief ministership of Prithviraj Chavan in 2012, the board of directors was dissolved and an administrator appointed after the RBI cancelled MSCB’s banking licence. The majority of the bank’s directors were from the NCP.

Before Ajit Pawar split the NCP and joined hands with the BJP, the latter had been attacking the NCP for years. A very recent sally came from Prime Minister Narendra Modi in June with regard to the multi-crore scam in MSCB. Addressing booth workers of the BJP in Bhopal, Modi had said there were allegations of scams of nearly ₹70,000 crore against the NCP, including the Maharashtra Cooperative Bank scam, the irrigation scam and the illegal mining scam. Today, however, the BJP sailed along with the decision to allow MCB to bank with the government.

BJP-controlled bank also granted permission

In the cabinet meeting, deputy chief minister Devendra Fadnavis expressed his unhappiness over MSCB being allowed to transact with the government and questioned why a district cooperative bank like the Mumbai Cooperative Bank (MCB) was not permitted to. MCB is under the control of BJP leader Pravin Darekar.