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JPC pulls up RBI for Madhavpura Bank fiasco

The Joint Parliamentary Committee investigating the stock market crash has pulled up regulatory agencies including Reserve Bank of India for not being vigilant in governing cooperatives, which led to the Madhavpura Mercantile Cooperative Bank fiasco, and said severest action deserves to be taken against the erring persons including the cooperative bank's chairman.

"What is most regrettable is the dubious role played by each of the regulatory bodies (RBI and Registrar of Cooperative Societies) in the entire episode," JPC said in its draft report.

Although RBI found that the MMCB chairman indulged in all sorts of malpractices for his personal gains during 1998 and forwarded a report to the Registrar of Cooperaives, JPC said, "the RBI did not pursue the matter further either with the state or the central registrar."

The committee said RBI did not take any follow-up action after noticing that MMCB's standard of credit appraisal was deficient.

"Disciplinary action should be initiated against the RBI assistant general manager (Ahmedabad) who accepted the report submitted by the State Registrar of Cooperative Society and did not pursue the matter further," the report recommended.

The draft report also blamed the registrar and its auditors for the MMCB fiasco.

"Equally deplorable is the role played by the registrar, who instead of constituting a special audit, just forwarded the report received from deputy registrar and never bothered to investigate the veracity of charges pointed out by no less than the apex bank of the country," it said.

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