Custodian For Baroda Coop Bank Soon

The Gujarat Registrar of Co-operative Societies (RCS) today decided to appoint a custodian for Baroda People's Cooperative Bank Ltd (BPCBL) under section 74 (D) of the Gujarat Co-operative Societies Act, 1961. This follows the resignation by the bank's 12-member governing board on Tuesday.

Saying that the appointment of a custodian is a temporary arrangement to fill the void left due to the unexpected resignation of the governing board, an authoritative source speaking on condition of anonymity said the Ahmedabad office of the Reserve Bank of India is contemplating to appoint an administrator. "RBI's Ahmedabad office has apprised its corporate office in Mumbai on the latest status with respect to BPCBL and sought permission to appoint an administrator for BPCBL. As soon as the approval comes through, an administrator would replace the custodian at BPCBL," he added.

 

On Tuesday, the BPCBL governing board, after deciding to resign, had also sent an application to the State Bank of India asking the latter to suspend BPCBL from the clearing house, following which cheques issued by BPCBL customers were not being honoured. Meanwhile, BPCBL managers had on Tuesday imposed a restriction allowing its customers a maximum withdrawal of only Rs 1,000.

According to BPCBL chairman Suresh Patel, the directive issued by the Reserve Bank of India (RBI) on November 29, 2001 not to accept any fresh deposits from customers or borrow money from any lending institutions had left the governing board with no choice but to resign.

The RBI had issued the said directive following the revelation that BPCBL had lost Rs 20 crore in a bogus Letters of Credit (LCs) fraud involving the Anand-based Charotar Nagrik Cooperative Bank (CNCB). LCs, purported to have been signed by the CNCB managing director Chiman Sathi, were got discounted by some businessmen from BPCBL. Despite the standing guarantee to repay the money to BPCBL, CNCB paid only Rs 5 crore on the pretext that the remaining LCs were bogus.

When the fraud came to light, Sathi had tendered his resignation and a run on deposits of CNCB had started, following which RBI indefinitely suspended CNCB from clearing house operations on January 2.

Emphasising that it had already been established that the Anand-based CNCB was instrumental for the fraud, Suresh Patel felt his bank was being unnecessarily punished. Since CNCB had committed the fraud, RBI should not have put the restrictions on BPCBL, he added.

Revealing that the above revelation had started a run on deposits at his bank too, Suresh Patel said, "How long can we go on a allowing depositors to withdraw from the bank without being able to get funds from elsewhere in view of the RBI directive."

However, RBI regional director (Gujarat) V S Das said the central bank issued the directive imposing the restriction on borrowals when it realised that BPCBL was borrowing only with a view to repay the depositors who had queued up to redeem their deposits and withdraw from their savings bank and current accounts.

BPCBL has in all six branches in and around Vadodara. It has a deposit base of Rs 185 crore.