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Bailout for Madhavpura bank proposed

A government-appointed panel has proposed the injection of Rs 11.70 billion into troubled Madhavpura Mercantile Co-operative Bank to save it from liquidation, a panel member said on Monday.

Madhavpura bank, with deposits of over Rs 14 billion, was plunged into a payments crisis in early March after a steep fall in its reserves due to over exposure to the country's shaky stock market.

The Ahmedabad- based Madhavpura bank has been placed under the administration of the Reserve Bank of India, which has frozen withdrawals above Rs 1,000.

The panel, appointed by the Central Registrar of Co-operative Societies, has suggested raising Rs 7 billion from co-operative banks which parked funds with Madhavpura bank and the rest from the Deposit Insurance and Credit Guarantee Corp.

"The report has been submitted to the RBI and the Central Registrar of Co-operative Societies. Now it's up to them to act on it," the panel member said, requesting anonymity.

"Smaller co-operative banks are keen to ensure the survival of Madhavpura bank and would contribute about four per cent of their current deposits for the purpose," he said.

Police have arrested Madhavpura Banks top officials on allegations of fraud.

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