Metro Bank for lifting of RBI restrictions

The officials of the Metro Co-operative Bank, one of the four co-operative banks in Surat which collapsed between September and October of this year, have expressed hopes about the revival of the bank soon.

The bank has written to the Reserve Bank of India (RBI) seeking the lifting of restrictions under section 35 (A) of Banking Regulations Act.

The bank has also sought permission for doubling the withdrawal limit from the present Rs 500 per customer. The bank's plea is based mainly on the recoveries it has made since the crisis.

The bank is also planning to submit an action plan for its revival to the apex bank soon, which would focus on the recovery made so far, and the fresh deposits it could attract, if the restrictions are lifted.

It is worth mentioning here that though the Metro Bank officials are presenting a rosy picture, they are concealing more than what they are revealing. Industry sources said that RBI conducted an inspection of the Metro Bank between October 18 to 30.

According to RBI norms, while the capital to risk assets ratio (CRAR) of any urban co-operative bank should be a minimum of 9 per cent, according to the inspection report, the CRAR of Metro Bank is at -27.1 per cent.

The RBI has advised Metro Bank to bring the CRAR level to above 50 per cent of the stipulated minimum level, within six months, which industry experts say is an uphill task.

According to the report, the net non-performing assets (NPAs) of the bank are over 90 per cent. In simple terms, this means that the bank has failed to recover 90 per cent of the amount that it gave as loans.

Further, the apex bank has classified Metro Bank under Grade - IV. The RBI has advised the Metro Bank to rectify the various features that resulted in it being classified under Grade - IV, which experts again say is very difficult. The report also says that the Metro Bank is not complying with Section 11 (1) of the Banking Regulations Act, 1949.

RBI has asked Metro Bank to apply for exemption from provisions of this section to the central government. It may be recalled here that on October 21, RBI placed restrictions under Section 35 (A) of Banking Regulations Act, on the Metro Co-operative Bank.

The bank was caught in a crisis since a few days, and was facing problems in meeting clearing house requirement. The bank had sought a withdrawal from the clearing house from October 21 onwards. The Surat Bankers' Clearing House had accepted the bank's plea and also proposed to the RBI to cease its membership.

The bank has loan advances of around Rs 16.20 crore.