Superseded co-operative bank claims marked progress

The Maharashtra State Cooperative Bank (MSC), whose board was superseded 11 days earlier, had actually improved its numbers substantially over the past year.

The latest balance sheet for 2010-11 shows operative profit of Rs 15.8 crore and a positive net worth, of Rs 238 crore. This is a marked improvement from its numbers in the corresponding period last year (2009-10), when the reported profit was Rs 2 crore. And, an inspection by the National Bank for Agriculture & Rural Development (Nabard) had showed negative net worth of Rs 144 crore, with loss of Rs 776 crore. Gross non-performing assets were 31.2 per cent; that has come down to 21 per cent.

Based on Nabard’s inspection report and auditors Joshi and Nair, the Reserve Bank of India advised the state government to supersede the board of the MSC bank. The latest numbers are yet to go through any inspection from Nabard.

The bank's capital funds risk weighted assets ratio (CRAR) has also become positive, at 3.84 per cent, from minus 1.5 per cent during the same period in 2009-10.

According to the bank's balance sheet for 2010-11, which came up for discussion by the new administrators on Monday, net interest margin had surged to Rs 243 crore from Rs 100 crore.

A senior official of the state cooperation department (the parent department for cooperative banks), who did not want to be identified, told Business Standard, “The balance sheet prepared by the bank has been assessed by the two administrators. Now the bank's statutory auditors will give their remarks. After that, the final balance sheet will be published for 2010-11. There is no need for the bank to submit the balance sheet to Nabard. However, Nabard can give its remarks during regular inspection.”

“The bank has provided fully as per Nabard's suggestions and additional provision to the extent of Rs 490.7 crore has been made in 2010-11. This is contrary to what Nabard has reported in its inspection report, that a few loan accounts were not fully provided and some amount was taken off the balance sheet,” said a former director.

Also, the state government has given Rs 270 crore (Rs 75 crore towards share capital and Rs 195 crore towards invoked default guarantees) to the bank. “If the state government extends further assistance of around Rs 200 crore, the CRAR will be improved more and a banking licence can be sought very soon. MSC Bank was pursuing the state government for the past five years for the release of Rs 1,600 crore towards the guarantee for loans granted to various sugar and spinning cooperative mills,” added the former director. He said this turnaround was possible only because of various measures taken by the board of directors during the past five years.