Suvarna cheque clearance blocked

The president of the Clearing House, Pune, has suspended the clearing of cheques drawn on the loss-making Shree Suvarna Sahakari Bank till further notice.

Clearing House sources confirmed the development. R S Borade, spokesperson for the clearing house, which is run by Union Bank of India, said the action came as a result of unrestored overdraft by Shree Suvarna Bank. "We may revoke the suspension once bank restores the overdraft," Borade said.

Shree Suvarna Bank has been under stress due to mounting losses and inability to meet the capital adequacy norms laid down by Reserve Bank of India.

It has recently proposed to merge its operations with Pune-based Cosmos Co-operative Bank.

The merger is yet to get the clearance from its shareholders, who will consider the proposal in the ensuing annual general meeting of the bank. Cosmos Bank's board, on the other hand, has approved the proposal.

Ever since the proposal was announced on Satrurday last((9 September) Shree Suvarna's customers have made a beeline to withdraw their deposits from the bank.

Bank sources said the payout in the last four days was about Rs 40 crore due to the heavy withdrawals. "This is the kind of amount our customers withdraw in a month, so we have nearly finished our liquidity," the sources said.

Shree Suvarna Bank has a capital base of Rs 10 crore, a deposit base of over Rs 800 crore, advances of Rs 650 crore and overdues of Rs 125 crore. It has a network of 12 branches and has a staff strength of about 350.

Cosmos Bank has been on an acquisition spree for the last three years and has so far taken its fold three co-operative banks from Andhra and Gujarat.

It also has plans to acquire three more, principally to expand its network to 100 branches by next year. Chairman Mukund Abhyankar had recently told the media that the bank had reserves of Rs 420 crore which is enough to absorb the losses of Shree Suvarna.