Rbi Begins Liquidation Of Laxmi Co-Op

The Reserve Bank of India (RBI) has today asked the Gujarat Registrar of Co-operative Societies (RCS) to pass an order under Section 115(A) of the Gujarat Co-operative Societies Act for the winding up of the crisis-hit Shree Laxmi Co-operative Bank Ltd (SLCB) and to appoint a liquidator for the purpose.

Disclosing this to Business Standard, authoritative sources said the central bank has issued the letter recommending liquidation of SLCB in view of the fact that the bank had turned insolvent with a negative net worth and negative capital adequacy ratio.

Moreover, on October 16 the Gujarat RCS had also written to the RBI seeking its directions for liquidation of SLCB and had withdrawn its earlier request for appointment of an administrator.

The financial health of SLCB had turned so bad that it did not have funds even to conduct its day-to-day operations, following which the bank chairman Dinesh Dani had announced indefinite closure of all its five branches with effect from October 8.

To add to SLCB's bad financial health, scrutiny of the books of accounts and study of the liquidity position of SLCB undertaken by Gujarat RCS and RBI had also brought to light certain financial irregularities in the bank.

Sources said that immediately after receiving the RBI directions today, the Gujarat RCS initiated the process of appointing the liquidator to take charge of SLCB. The announcement to this effect, along with the name of the liquidator, would be made tomorrow (Friday), they added.

Meanwhile, the Gujarat RCS has also filed a criminal complaint under sections 114, 405 and 409 of the Indian Penal Code at the Navrangpura police station, against the top management of the bank for cheating and breach of trust.

This criminal complaint filed by the office of the district registrar of cooperative societies (banking) against 11 directors of SLCB (including the chairman, vice-chairman, managing director and other directors on the SLCB board), alleges that they had misused their position and cheated the bank to the tune of Rs 1,64,44,000 by making fraudulent advances.