The Reserve Bank of India's (RBI) inspections have revealed that Ganesh Bank of Kurundwad, which is under moratorium from January 6, did not have processes to assess the requirement of capital based on its risk profile and also lacked any strategy for augmenting capital. | |
| The bank's asset quality showed substantial deterioration as the bank lacked strategy to measure, monitor and manage interest rate risks, RBI pointed out in its report on the final inspection done from August to October 8, 2005. |
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| After placing the Kolhapur-based bank under moratorium, RBI worked out a scheme for amalgamation of Ganesh Bank with Kerala-based Federal Bank. |
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| In its affidavit before the Bombay High Court, RBI said the bank management was given adequate time to restructure its operations and augment its capital base. The bank's shareholder equity had fallen to Rs 84 lakh as on March 2005 from Rs 6.40 crore a year ago. |
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| During the last inspection, the shareholder equity was assessed to be minus Rs 3.05 crore after providing for Rs 3.89 crore for depreciation on investments. |
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| The high court is hearing a petition challenging the merger of Ganesh Bank with Federal Bank. The Supreme Court on January 31 had dismissed RBI and Federal Bank's petition challenging the high court's stay on amalgamation of Ganesh Bank with Federal bank. The merger was to come into effect from January 25. |
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| The Supreme Court had directed the high court to hear the case on a daily basis. |
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| RBI said there were no irregularities in the working of Ganesh Bank, but the private sector bank was advised to take steps to increase capital funds to Rs 50 crore and rectify deficiencies. |
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| Ganesh Bank's counsel N Sirwai said the moratorium and subsequent steps for merger were totally unjustified as bank had initiated steps to augment its capital base. |
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| Ganesh Bank has reported losses in 2004-05 for the first time and is blaming changes in provisioning norms effected by RBI. |
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| The bank said the loss was notional and it had adequate liquidity, Sirwai said. |
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