Century Co-op Bank files cases against defaulters

The Surat-based The Century Co-operative Bank Ltd is filing civil suits against loan defaulters, who did not respond to the bank's recovery notices.

Ramesh Rajput, manager of the bank, said, "Our total loan advances currently stand at Rs 14.75 crore. After our suspension from the clearing house on August 31, we issued notices to 182 persons, who have taken loans from us, asking them to repay the loan amount. As there was no response from them, we have initiated legal procedures."

"Out of the total 182 defaulters, we have so far filed civil suits against 21 persons. We plan to file similar suits against the other defaulters too. But this is a time consuming procedure; we believe the exercise would take at-least two months," Rajput said.

About the chances of the bank resuming normal functions, Rajput said, "We need to recover Rs 4 crore to restart banking operations. At present, we have recovered nothing, but we are hopeful of recovering the entire loan amount. As I have said earlier, this is a time consuming procedure. So it would be a few more months, before we return to normality."

Century Co-operative Bank was suspended by clearing house on August 31 as it could not meet the requirements for the day. This led to a run on the bank; in less than a week, more than Rs 2.50 crore was withdrawn.

The bank was directed by the Reserve Bank of India to concentrate on making recoveries so that it could improve it's financial health. The bank, however, could not make any major recovery, in view of which, the RBI placed restrictions under Section 35 (A) of the Banking Regulation Act on September 11, 2004.

Though the bank officials are expressing confidence of recovering the entire loan amount, industry sources say this would not be easy. "The RBI had placed similar restrictions on Diamond Jubilee Co-operative Bank, Suryapur Co-operative Bank and The Vikas Co-operative Bank. Despite adopting a stern posture, none of these banks was able to make significant recoveries.

"It would also be very difficult for Century Co-operative Bank to recover much of its money, as a big percentage of the total loan amount has been taken by the bank's directors and other officials," said a banking source.