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RBI writes to RCS to supercede Krushi Co-op Bank

The Reserve Bank of India on Tuesday wrote to the Registrar of Co-operative Societies to supercede the board of the Secunderabad-based Krushi Co-operative Urban Bank Ltd and requested the RCS to decide on liquidation or merger of the bank on an 'expeditious basis'.

For the first time, the apex bank has also directed the RCS to disqualify the members of the bank board from membership of all other co-operative societies, RBI officials said.

The action comes in the wake of the bank facing a run on its deposits on Monday, which effectively reduced the liquidity due to severe asset liability mismanagement, officials said.

Based on market intelligence reports, RBI had conducted a quick scrutiny of accounts in March last and had placed the bank under RBI direction in June, 2001. Registered on April 1, 1998, it was given licences to carry on banking business on June 22 the same year.

The RBI scrutiny had found that the bank had a severe asset-liability mismanagement problem. As against deposits of about Rs 350 million, the bank's loans and advances were over Rs 530 million and there has been no improvement during the last two months, the officials said.

The bank had given large unsecured advances to four of its directors, including the chairman and vice-chairman and its exposure to the capital market was to the tune of Rs 22.5 million, the officials said.

According to RBI officials, the non-performing assets of the bank were estimated at a little over Rs 330 million or 62.9 per cent of its total loans and advances.

Directions given to the bank in June this year put a freeze on loans and advances as on March 31, 2001 and was asked to obtain security for its unsecured loans by September 30.

It was also asked to bring the loans and advances given to its directors to not more than 10 per cent of its net demand and time liability.

As per the RBI's direction, the bank was to reduce its NPAs to less than 10 per cent of its net advances by September 30.

The Apex bank also curtailed the sanctioning powers of the bank's board. it had also asked the bank to appoint a loan committee, the official added.

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