Administrator For Baroda Peoples Coop Bank Soon

The Gujarat registrar of co-operative societies (RCS) has decided to appoint an administrator for the Baroda People's Cooperative Bank Ltd (BPCBL) under Section 81 of the Gujarat Co-operative Societies Act, 1961.

A custodian was temporarily appointed for this bank on January 18 by the Gujarat RCS following the resignation submitted by its 12-member governing board and the RCS was awaiting RBI approval to appoint an administrator.

Gujarat RCS R M Joshi said as the RBI approval to appoint an administrator has come, the name of the administrator, who would replace the custodian at BPCBL, would be announced within the next couple of days. After taking charge he would decide whether the bank can be revived or not, he added.

BPCBL, which has totally six branches has deposits of Rs 85.98 crore and advances of Rs 90.42 crore. It had run into problems following an order issued by RBI on November 29, 2001 directing BPCBL not to accept any fresh deposits from customers or borrow money from any lending institutions.

According to the former BPCBL chairman Suresh Patel, the RBI directive had left the governing board with no choice but to resign because it was not possible to run the bank under such restrictions.

The RBI had issued the said directive following revelation that BPCBL had lost Rs 20 crore in a bogus Letters of Credit (LCs) fraud involving the Anand-based Charotar Nagrik Cooperative Bank (CNCB). LCs purported to have been signed by the CNCB managing director Chiman Sathi were got discounted by some businessmen from BPCBL. Despite the standing guarantee to repay the money to BPCBL, CNCB paid only Rs 5 crore on the pretext that the remaining LCs were bogus.

When the fraud came to light, Sathi had tendered his resignation and a run on deposits of CNCB had started, following which RBI indefinitely suspended CNCB from the clearing house operations on January 2.

Emphasising that it had already been established that the Anand-based CNCB was instrumental for the fraud, Suresh Patel felt that his bank was being unnecessarily punished for no fault of its own. Since CNCB had committed the fraud, RBI should not have put the restrictions on BPCBL, he added.

Revealing that the above revelation had started a run on deposits at his bank too, Suresh Patel said, "How long can we go on a allowing depositors to withdraw from the bank without being able to get funds from elsewhere in view of the RBI directive."

However, RBI regional director (Gujarat) V S Das said the central bank issued the directive imposing the restriction on borrowings when it realised that BPCBL was borrowing only with a view to repay the depositors who had queued up to redeem their deposits and withdraw from their savings bank and current accounts.