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RBI probe sought into 7 more district co-op banks

Renni Abraham & K Ram Kumar

The Maharashtra government has sought a Reserve Bank of India probe into the government securities transactions undertaken by the Pen Co-operative Bank and Junglee Maharaj Co-operative Bank in Pune.

The state government has also placed on watch the functioning of seven other district central cooperative banks (DCCB) at Solapur, Nanded, Beed, Parbhani, Jalna, Jalgaon and Dhule.

"Four days back, the state government had issued notices to the Nagpur DCCB, Osmanabad DCCB under Section 78 of the Maharashtra Cooperative Societies (MCS) Act, 1960, to appoint an administrator to take over the functioning of the banks," a Mantralaya official said.

"The state government is also in the process of issuing a notice to the Wardha DCCB (likely next week)," the official added.

This follows revelations of questionable financial transactions between the Osmanabad and Wardha DCCBs with the Nagpur DCCB.

The Osmanabad DCCB had received Rs 500 million from the Nagpur DCCB, of which it adjusted Rs 200 million towards liquidating its liability to the latter and utilised Rs 300 million for purchasing debentures.

Similarly, the Wardha DCCB received Rs 250 million from the Nagpur bank.

The government's initiative comes even as it awaits RBI requisition to dissolve the board of directors of the Nagpur DCCB and appoint an administrator under Section 110 (A) of the MCS Act -- pending for the last one week.

A senior government official said: "Under Section 110 (A), an order can be directly executed by the Registrar of Cooperative Societies (RoCS) for dissolving the board of directors of a cooperative bank and appoint an administrator. Under section 78 this same process becomes lengthier."

The Nagpur DCCB's net worth has been eroded to the extent of Rs 102.16 crore as per the NABARD report submitted to the state government. Further, the report notes that the non-performing assets of the bank had increased, with little efforts being made to recover the same.

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