RBI clamps down on Sarvodaya Nagarik Bank

Despite the state government's efforts to revive the Visnagar-based Sarvodaya Nagarik Co-operative Bank by asking two other banks to invest money in it, the Reserve Bank of India (RBI) has clamped section 35 (a) of the Banking Regulation Act on the bank with effect from Monday, suspending it from the clearing house operations.

Falling short on the cash liquidity ratio (CLR), the bank will now not be allowed to make payments to depositors in excess of Rs 1,000.

The RBI decision has not only come as a surprise for the depositors of the bank b ut also for the bank's management.

Meanwhile, officials of the bank visited Mumbai on Tuesday and met RBI officials in a bid to chalk out the future course of action for the bank.

The Bank officials said they are in a position to pay back fixed deposits of people and are meeting in Visnagar to work out a plan for the bank.

With a depositor base of about 36,000, the total deposits of the Visnagar-headquartered bank were Rs 15.6 crore. Bank sources said the bank's lending exceeded Rs 25 crore, thus causing a liquidity crisis.

About six months ago, the state government, in its attempt to strengthen weak co-operative banks by making stronger banks to invest in them, had asked Mehsana District Co-operative Bank and Mehsana Urban Co-operative Banks to maintain the CLR of the Sarvodaya Nagarik Co-operative Bank, which is also in Mehsana district.

However, with no substantial improvement in the CLR, the RBI clamped section 35(a) of the Banking Regulation Act on Monday.

The regional director of RBI, Ahmedabad, Vani Sharma and general manager, A Udgata, were not available for comments.

The bank's general manager Mayank Maniyar said the outstanding advances of the bank stood at Rs 25 crore as of Monday, while the deposits were worth Rs 15.66 crore.

"We went and met officials of the RBI in Mumbai and will work towards strengthening the bank. We are paying back a maximum of Rs 1,000 to depositors, but there is no huge rush in the bank for withdrawal," the managing director said.

Prakash Gurjar, president of the All Gujarat Co-operative Depositors' Association (AGCDA), said while the bank is out of the clearing house temporarily, the step by the RBI is a preventive one, which will ensure that the bank does not plunge further into the crisis.

"An administrator will be appointed, but at least this prevents the bank from going deeper into crisis," Gurjar said.

Atul Brahmbhatt, an office-bearer of the AGCDA based in Mehsana district, said despite the state government asking two stronger banks to take control of Sarvodaya Nagarik Co-operative Bank in order to help it overcome the liquidity crisis, the situation has arisen where section 35 (a) of the Banking Regulation Act has to be clamped.

"This means that the state government has failed in its attempt to strengthen the bank," said Brahmbhatt.

Minister of co-operation, Bhupendrasinh Chudasma, could not be reached for his comments.