Janakalyan Bank averts crisis

Finance ministry says the bank has enough liquidity

The city-based Janakalyan Sahakari Bank Ltd, which faced a run on its deposits following reports about its weak financial health, managed to avert the crisis following the finance ministry's assurance that the bank was solvent and that the Reserve Bank of India's notice pertained only to some audit matters.

"There are no problems with the solvency of the bank and the depositors need not worry," a ministry official said.

In a meeting held with the RBI today, the bank said it had enough liquidity and maintained Rs 200 crore worth funds over and above the statutory liquidity requirement. The RBI, in turn, has also assured the bank of liquidity support as and when required .

The bank faced a run on deposits of almost Rs 40 crore over two days - Wednesday and Thursday following reports in a local paper that the RBI fined some of its directors for alleged irregularities. The branches at Mulund and Ghatkopar saw huge queues of worried customers even on Thursday.

Banking sources said there was no RBI penalty on the directors but the central bank had issued a warning to the bank on reports of serious breach of norms regarding loans against shares and a very high level of non-performing assets. The net NPAs of the bank was over 16.5 per cent at the end of 2004-05 against 11.11 per cent as on March 31, 2004.

The NPAs have grown owing to the revised norms for recognising assets as NPAs in 90 days against the earlier norms of 180 days.

The cooperative bank has seen its deposit base shrink by 16 per cent to Rs 1,100 crore in 2004-05 from Rs 1,308.77 crore in the previous year. Advances also dipped by 41 per cent to Rs 560 crore from Rs 950 crore in the same period, R Mishra, chairman of the bank, said.

Chief executive N D Behere said the bank was making special efforts for reducing NPAs through recoveries.

The bank has already recovered dues worth Rs 12 crore till date and expects the figure to touch Rs 60 crore by the end of this financial year.