Nagpur Mahila Bank depositors a worried lot

Once bitten is twice shy they say, but often temptation is just too hard to resist! Many of the depositors of the Nagpur Mahila Nagarik Sahakari Bank, which has now come under a cloud, are from families who held deposits with the Laxmi Bank "" the first big bank that went bust in the country as far back as 1958.

The reason they chose a cooperative bank over so many nationalised banks was not the service levels, but a slightly higher interest rate on deposits.

The Akola headquartered Laxmi Bank had 4,000 branches in the country and its depositors, employees and creditors are yet to recover their dues.

In this backdrop, the fear of depositors of the Nagpur Mahila Nagarik Sahakari Bank today is perceptible. There are queues at the bank everyday with people using every excuse under the sun to convince authorities to allow them to operate their accounts.

They come with files containing applications addressed to the branch manager of the Mahila Bank, its directors, the RBI, the finance minister, the prime minister and Sonia Gandhi. The reasons range from medical treatment, travel abroad or children's education.

The RBI had imposed a moratorium on public transactions of the Mahila Bank last month permitting withdrawals of only Rs 1,000 per person irrespective of total individual deposit.

The RBI's restrictions had come after the Hemani Group fraud involving the bank was exposed and a cooperative department audit report flayed the bank's management for irregularities.

Depositors of the bank have been running from pillar to post seeking assistance for withdrawing their money and fixed deposits. They fear that their money may never be fully recovered as has been the case with depositors of Laxmi Bank.

Once a big bank with an all India presence, Laxmi Bank's 24,000 depositors have a 44-year long wait to get their principal amount back. When the bank sunk in 1958, it had around 500 depositors in Nagpur, many of whom have since passed away.

The fraud in Laxmi Bank involved a sum of Rs 5.78 crore which according to RBI estimates should be equivalent to Rs 69.36 crore now.

Liquidation proceedings of Laxmi Bank started in 1960 and are still continuing. Realisation has been slow every time the bank's assets are put on the block as somebody challenges it. At times it has taken months together to receive the money after a sale.

The liquidators have been able to realise only 85 per cent of the principal amount of deposits in all these years. A sum of Rs 27 lakh remains unpaid from the bank's total deposit base of Rs 1.8 crore.

However, interest calculated at 6 per cent on deposits for the past 44 years works out to be Rs 6.55 crore. The official liquidator has realised Rs 6.6 crore by selling a plot of land at Temple Road here, but settling depositors dues has run into problems again as one of the promoter, Gopaldas Mohta's heirs, Shashikumar Mohta has challenged the sale.

The official liquidator will also have to shell out around Rs one crore towards capital gains tax on the land's sale.

After paying off depositors and tax, the liquidator fears there won't be much left for other claimants. Many of the 2,000 odd employees of the bank and its creditors have filed cases claiming their dues.

The process of disposing more assets, it is estimated, will not be enough to settle all dues. The claims of employees and creditors too are of the same level as that of depositors.

Formed on May 6, 1930, troubles started in Laxmi Bank as early as 1938. Fraudulent transactions and siphoning of depositors money were the main reasons for the collapse of the institution in 1958.

With Laxmi Bank as the backdrop, depositors of the Mahila Bank are a worried lot about the recovery of their deposits.