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Depositors withdraw Rs 650 mn from Ahmedabad bank

Jigna Shah in Ahmedabad

Ahmedabad-based Madhavpura Mercantile Co-operative Bank faced an unusual crisis on March 12, 2001 due to a rumour. The rumour started on March 8 in the city of Ahmedabad, which has now resulted in the withdrawal to the tune of Rs 650 million.

The rumour mill was abuzz that the bank gave bank guarantees amounting to Rs 1.5 billion to Ketan Parekh and his associates. Another rumour was that a relative of the chairman incurred a loss of Rs 500 million in Zee Telefilms shares.

The depositors were frightened that these losses would be settled with bank money. Depositors thronged the bank branches in Maninagar, Drive-In, Navrangura and other branches.

On March 9, Rs 140 million were withdrawn and by Monday evening, the figure reached Rs 650 million. Nandlal Parikh, chairman, Madhavpura Mercantile Co-operative Bank, told rediff.com, "Till March 12, depositors have withdrawn Rs 650 million but the bank is safe and there is nothing to worry. All the rumours and allegations are false and baseless. We have not given any bank guarantees to either Ketan Parekh or any brokers from his group and we are not helping them to settle their dues."

Sources in RBI say the central bank is investigating the bank's involvement in stock market transactions and its guarantees to stockbrokers.

The bank has issued advertisements in newspapers clarifying its position and has also promised to pay depositors. The bank has also refuted the allegations and rumours in the ad. But the advertisements have had little impact in the minds of depositors.

Shashikant Shah, a retired bank employee told rediff.com, "I don't care whether this is true or false. If so many people are withdrawing money, it will affect the future of the bank. I am withdrawing because of its shaky future and not the rumour."

Pushpa Shah, a housewife said, "The credibility of the bank is at stake and I don't want to keep money here. I will put it in a nationalised bank."

Madhavpura Bank is also a clearing agent for about 200 other citizen co-operative banks. The bank has Rs 4 billion in deposits.

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