MSC Bank gets banking licence, scope for stronger business

The Maharashtra State Cooperative Bank (MSCB), which has been under the administrator’s rule since May last year, finally received the banking licence on Thursday from the Reserve Bank of India (RBI). The state’s anchor bank for agriculture and allied activities had missed the pertinent deadline of March 31.

MSC Bank managing director Pramod Karnad, while confirming the development, said the licence came after the entity fulfilled the necessary formalities. “Also, we had achieved a positive net worth and four per cent CRAR (capital-to-risk assets ratio) as mandated by the RBI and Nabard (National Bank for Agriculture & Rural Development), he told Business Standard. MSCB’s CRAR stood at 5.76 per cent.

A state government official said the license was crucial for MSCB to “regain its past glory” and “enhance its credibility”. It would also facilitate the bank to get better credit rating by the regulator, auditors and the government. Further, the license would help MSCB establish ATM centres. Its forex operations, too, would gain, as some relaxations are expected from overseas bankers. Besides, risk management parameters by other banks could be modified.

The official informed that the government had provided Rs 50 crore in the supplementary demands presented to the legislature on March 17. “This helped MSCB fulfil Nabard’s condition of achieving 4 per cent CRAR,” he said. “Nabard had, in its audit report for 2010-11, shown 3.95 per cent CRAR.”

It was certain recommendations in the Rakesh Mohan Committee report that made banking licence mandatory for the MSCB. Across the country, there are 134 banks that have not received the licenses from central bank. MSCB was one of the four state cooperative banks at the national level that had yet to qualify for a license.

Of the 31 state cooperative banks, 25 state cooperative banks have already granted banking license. If the banks are unable to get a license, then they have to either become a cooperative credit society or merge with another bank.