Amanath Co-op Bank to auction pledged properties to cut NPA

Withdrawal curbs continue to irk depositors

The board of directors of crisis-hit Amanath Co-operative Bank, as part of its efforts to pull the bank back from the brink, is moving to auction some of the properties under its pledge to retrieve part of advances, which has turned "non-performing assets". The bank, over the past two weeks, has been hit by a severe crisis with the RBI restricting withdrawals to just Rs 1,000 to stop the bank from going down under.

Senior management officials of Amanath said they would auction around five acres of land on the Bannerghatta Road on May 26 and May 28. This will be followed by auctioning another six acres of land on the same stretch in the first week of June. The bank is hoping to garner around Rs 32 crore through these steps and hopes these would impress the RBI to lift the curbs on withdrawals. The RBI officials, however, said they could not comment on what steps they would be taking in respect of Amanath other than the public order they had issued in restricting the withdrawals.

The board is also looking to shore up the equity base of the bank - at present Rs 7 crore -besides looking at a merger as a last resort.

The bank has a depositor base of a little over 200,000 across Karnataka and most of them are from the Muslim community. Many are small-time shopkeepers. It is understood that there is high stress on around Rs 66 crore worth of advances on the bank, based on which the crisis has escalated. It is understood that the total deposits of the bank is a little around Rs 400 crore and the loan book is at Rs 240 crore. Further information indicates that the bank has posted losses of Rs 113 crore for the last fiscal.

Senior bank officials, on the condition of anonymity, said the new directors, who came on board during September 2012, have been making efforts to shore up the operations of the bank and are trying to undo the damage caused during the past six years due to various litigations. "It is a long process to untangle the historic issues of lending without any proper documentation and the related legal issues," they added.

The bank was started during January 1977, with 3,000 members and now has 41,000 members. It has 15 branches across Karnataka and focuses on middle and lower strata of society, mostly in the hitherto unbanked/underbanked areas. The bank has 419 employees on its roll, including 74 officers.