Amanath Co-operative Bank crisis escalates after withdrawal curbs

The bank has over 200,000 depositors across Karnataka, most of them Muslim shopkeepers. It is understood that there is high stress on around Rs 66 cr worth of advances on the bank

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The crisis at Bangalore-headquartered Amanath Co-operative Bank is escalating.  The Reserve Bank of India (RBI), along with the management of the bank, are holding extensive discussions on how the bank could be salvaged.

RBI, over the past week,  issued a circular directing depositors not to withdraw more than Rs 1,000 over a six-month period, which has led to large-scale crisis at Amanath’s head office in Bangalore.  They even damaged the properties of the bank after there were rumours RBI had ordered the bank to cease all operations.

Naseer Ahmed, chairman, of the bank, said they were discussing with stakeholders and RBI on how the equity base of the bank could be shored up and were also looking at a merger with another bank.

The bank has little over 200,000 depositors across Karnataka. Most of the them are Muslim 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 are around Rs 400 crore and the loan book is at Rs 240 crore. There are indications the bank has posted losses of Rs 113 crore for last fiscal. The equity capital is at Rs 7 crore.

Senior bank officials on condition of anonymity said the new board of directors, inducted in September 2012, has tried to shore up the operations of the bank and undo the damage caused during the past six years due to litigations.

Long process
“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 in January 1977, with 3,000 members and now has 41,000 members. The bank has 15 branches in Karnataka and has been focusing small savers, mostly in areas with few or no bank branches. The bank has 419 employees on its rolls.

“Keeping this objective in view, Amanath Bank opened branches in such areas which are predominantly resided by middle-/lower-income groups and the areas concentrated by minorities and backward classes to whom commercial banks are not easily accessible,” the bank officials added.

RBI conferred the scheduled status on Amanath Bank effective from January 2000 and has included it in the second schedule to the Reserve Bank of India Act, 1934.