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Madhavpura bank depositors to take to streets

Hundreds of harried depositors, hit by one of the biggest payments crisis in the country's co-operative banking sector, will demonstrate in Ahmedabad on Tuesday to demand a government guarantee on their savings.

"Depositors of the Madhavpura Mercantile Cooperative Bank see no other way but to take to the streets to draw the attention of the authorities," Shivkumar Agarwal, secretary of the Nav-Gujarat Bankers Customers Protection Council said on Monday.

The council, a forum of depositors whose savings are stuck in the troubled Madhavpura Bank, was formed after the bank was placed under an administrator three weeks ago by the Reserve Bank of India (RBI).

The bank suffered a cash crunch due to excessive exposure to the stock market, which fell sharply last month.

The benchmark Bombay exchange index has plummeted more than 20 per cent since March 1.

The RBI has imposed a withdrawal limit of Rs 1000 per depositor. A proposal to raise that limit to Rs 5000 was under the central bank's consideration, Agarwal said.

He said the council would send a memorandum to the central and state governments seeking their intervention to resolve the crisis that has left over 100,000 depositors clueless about the fate of their savings.

"The only way to save Madhavpura Bank from liquidation is through government intervention," he said, adding that would help ensure the return of their deposits.

Madhavpura bank had deposits of over Rs 10.56 billion at the end of 1999/2000 (April-March), mostly from small depositors and district urban-cooperative banks.

A central bank official said on Monday that it has asked all commercial banks to report losses expected from dealings with cooperative banks.

State-run Bank of India said last week that it suffered a loss of Rs 1.3 billion after cheques issued to it by the troubled Madhavpura bank bounced.

There are more than 2000 co-operative banks in India.

WARY CUSTOMERS

"Our trust in the co-operative banking system has been betrayed and I would ensure that the coming generations in my family do not deal with a co-operative bank," said Ketan Majumdar who had a million rupees in Madhavpura bank.

There are over 200 co-operative banks in Gujarat.

"We are getting frantic calls from deposit holders in co-operative banks asking what to do with their deposits," said Madhav Mehta, chief general manager of the State Bank of India, the country's largest commercial bank.

He said the crisis in co-operative banks have resulted in a flight of deposits to the state-run banks.

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