Liquidator For Laxmi Co-Op Bank On Cards

Both the Gujarat Registrar of Co-operative Societies (RCS) as well as the Reserve Bank of India (RBI) are learnt to be in favour of appointing a liquidator for the crisis-hit Shree Laxmi Co-operative Bank Ltd (SLCB).

While the Gujarat RCS is said to have sought the central bank's directions for liquidation of SLCB under section 115(A) of the Gujarat Cooperative Societies Act, RBI is learnt to have sent a letter to its Mumbai office recommending liquidation and withdrawing the earlier request for appointment of administrator.

This follows the scrutiny of books of accounts and study of the liquidity position of SLCB undertaken by the Gujarat RCS and RBI.

Today the State RCS also issued a show cause notice under section 76 B of the Gujarat Cooperative Societies Act, 1961 to the board of SLCB asking why it should not be superseded in view of the financial irregularities detected in the bank. The board has been directed to file its reply before October 24.

Disclosing this, knowledgeable sources said that SLCB is in such a bad shape financially that both Gujarat RCS and RBI have concluded that "the situation looks grim for this bank."

Emphasising that SLCB does not have any funds to even conduct day-to-day business, they said, "The request for appointment of Administrator was withdrawn because there does not seem anything left to administer."

However, the situation does not look as hopeless or bleak for 95 per cent of SLCB depositors, they added.

Of the 40,039 depositors of SLCB, only 113 have deposits above Rs 1 lakh. All the others have deposits below Rs 1 lakh. As there is no default in the payment of insurance premium, in the event of liquidation, the deposits of 39,926 customers are safe and secure and they would get back their money with interest from the Deposit Insurance and Credit Guarantee Corporation (DICGC).

Meanwhile, RBI is also learnt to be contemplating legal action against the top management of SLCB. Emphasising that RBI has consulted lawyers to know whether there are sufficient grounds to initiate criminal proceedings against the SLCB chairman and managing director, sources said that a decision to that effect would be taken in the next couple of days.