Century Co-op Bank board superseded, custodian appointed

The Gujarat government on Tuesday superseded the board of the crisis-ridden Century Co-operative Bank Ltd, and appointed C V Chaudhary, special auditor, Maroli sugar factory, as the bank's custodian for a period of one year.

The move was very much on the cards as Century Bank's chief executive officer Ramesh Rajput had urged the state government and the Reserve Bank of India (RBI) on February 1 to supersede the board.

Rajput had reasoned that since the bank has failed to make any substantial recovery of loan advances, the board should be superseded.

In response, the state registrar (co-operative societies) R P Gupta on Tuesday informed the bank that its board has been superseded and appointed C V Chaudhary as its custodian for one year.

Banking sources said that the board would have no role to play in the bank's administration from now onwards. Chaudhary, who took charge from Wednesday, would now take care of the entire work.

"My main responsibility as the custodian of Century Bank would be to recover its loan advances, which are in the region of Rs 13 crore," Chaudhary told Business Standard.

It is worth mentioning here that the RBI has issued a show cause notice to Century Bank, asking it as to why its license should not be revoked. The bank was given fifteen days to file a reply to the notice.

"We were preparing to file a reply to the RBI notice, but since a custodian has been appointed now, he would be filing the reply," Rajput said.

It should be noted here that membership of Century Bank was revoked by the Surat Bankers Clearing House on August 31 last year, as it failed to meet the day-to-day clearing requirements.

Restrictions were clamped on it under section 35 (A) of the Banking Regulations Act by RBI on September 10. Financial irregularities committed by Century Bank chairman Hariprasad Malpani, who is in jail in connection with a fraud case since three months, and other directors, resulted in liquidity crunch, and the subsequent crisis in the bank.

As on August 31, 2004, Century Bank's loan advances were Rs 15.32 crore. The bank has recovered Rs 2.16 crore since, and its advances have come down to Rs 13.16 crore. Of this, almost 90 per cent of the amount is due in the names of the various directors, their family or friends. The bank's deposits are Rs 10.30 crore.