KCC Bank had been the backbone of agriculture in these districts. Mismanagement by the successive boards of directors has been blamed for its present condition of the bank which has hit the cooperative sector hard in the erstwhile Dharwad district that included Haveri and Gadag.
Besides adversely affecting the agriculture financing in the region, the failure of KCC Bank also the district central cooperative bank had landed several urban cooperative banks and societies into difficulties.
While the farmers who suffered three successive drought-conditions who could not repay the loans were blamed for the bank getting into trouble, the real cause was the erratic lending by the bank to institutions run by the board of directors.
Huge amounts were lent to Varada Sugars in Dombarmattur in Haveri district which did not take off. Several oil mills, spinning mills in Dharwad and Gadag districts were also given loans running into crores. That these institutions turned defaulters and no steps were taken seriously to recover the arrears left the bank in lurch.
The depositors who had kept their life time savings in a bid to encourage cooperative movement were left high and dry as the bank refused to refund their matured deposits. Several urban cooperative banks which had deposited their money with KCC Bank were unable to refund the money to their depositors.
The Apex bank and Nabard refused to refinance the KCC Bank, aggravating the trouble further. Repeated agitations, requests and petitions to the government by the depositors made the government announce packages to rescue the bank. But the money that was to come by way of package did not come through.
The bank has Rs 45 crore overdue from institutions like Varada Sugars, Kishna Cooperative Oil Mill, Nargund and Venkatshwar Cooperative Spinning Mill, Annigeri among others. The bank had also financed Ranna Sugars in Mudhol through consortium loan which was recently cleared under One-Time Settlement (OTS) scheme.
"Seizing the properties of the defaulter mills and auctioning the property to recover the dues is a cumbersome process. While legal action against Varada Sugars is on, we are persuading other institutions to lease the mills to others so that they can run and repay the loan to KCC Bank. The move is yielding positive results," said managing director of KCC Bank Pervez Khan.
While the bank has been able to improve the recovery from farmers and give fresh loans to them, it has not been able to comply with Section 11 of Reserve Bank of India Act. Non-compliance of the section could result in the RBI canceling the licence issued to KCC Bank.
The state government has to reimburse Rs 35 crore to the bank to compensate the interest waiver. If the bank manages to get Rs 50.96 crore and comply with Section 11 of the RBI Act, it will enter the clearing network and get refinance facility from Nabard.
"We have collected Rs 5 crore as the share amount from people and opened new account. It is a positive step towards reviving the bank. The state government had promised to give Rs 10 crore share amount. If that money is released, the bank will tide the crisis and start functioning as a normal bank," said the MD.
