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Rs 5 billion loan to revive MMCB sought

BS Regional Bureau

A three-point package to resurrect the crisis-hit Madhavpura Mercantile Cooperative Bank and to shield 168 banks having their deposits with MMCB from any cascading effects have been proposed.

Presiding over the co-operative banks' meeting here yesterday, Atmaram Patel, Congress MP and chairman of Gujarat Urban Cooperative Banks Federation, said the central government should extend Rs 5 billion interest-free loan to revive MMCB. This loan should be repayable over a span of 10 years.

Also, the Deposit Insurance & Credit Guarantee Corporation, a subsidiary of RBI, should make the full and final settlement to MMCB of the insurance money, which its depositors are entitled to receive in the case of liquidation of the bank. According to the federation, DICGC should not wait for the bank to go into liquidation for settlement of this liability as in this case the money is proposed to be used to avert the liquidation. If the deposit insurance money is paid now, 80 per cent of the depositors would get their money back, the federation added.

To safeguard the interest of 168 banks, which have funds to the tune of Rs 5.94 billion parked with MMCB in terms of deposits or call money, RBI or RCS should not label such deposits/funds as NPAs for the next five years.

This step would enable these 168 banks to tide over the major immediate hit their balance sheets for 2000-01 would have to take otherwise. It would also help them to absorb the spillover effect of the MMCB crisis over the medium term, Patel said.

Federation vice chairman Natwarlal R Patel said the above three proposals have been adopted unanimously and they would be submitted to the central government and the RBI very soon.

Patel further said that he and representatives of various co-operative banks would soon approach Prime Minister Atal Bihari Vajpayee to secure the Rs 5 billion 10-year interest-free loan and to demand that some changes be made in the insurance rules so that MMCB can get money from the Deposit Insurance Scheme before going into liquidation. The 45-day ban on premature redemption of deposits, Patel said, was expiring on April 30 and GUCBF would be approaching the central bank requesting the latter to extend it further.

Meanwhile, all banks affected by the crisis should pledge their deposits with MMCB for its rehabilitation package and not insist for redemption, he added.

The federation chairman said he was willing to take up responsibility to ensure that all the MMCB depositors get their money back. The state government, he felt, should set up a special court to deal with cases like MMCB. In that case the federation was ready to lodge a complaint against MMCB top-brass to bring them to book, he added.

Vinod Desai, a representative of Navsari People's Cooperative Bank said the apex Gujarat State Cooperative Bank should assume responsibility and act as a nodal agency for the rehabilitation of MMCB. A fund similar to Nabard's agricultural credit stabilisation fund, under the name of urban credit stabilisation fund, should be created to bail out co-operative banks in trouble as well as to safeguard the interest of depositors, he added.

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