Report Bares Host Of Lapses At Charminar Bank

The net worth and owned funds of Charminar Cooperative Urban Bank, whose high-profile chairman Syed Alamdar Sajjad Aga shot himself Tuesday, eroded to the extent of 71.4 per cent at the end of March 2001.

This has been brought to light in the statutory inspection conducted by the Reserve Bank in October-November 2001 with reference to the bank's financial position as on September 2001.

The details of the inspection report were revealed by the chief minister N Chandrababu Naidu in the state legislative assembly today.

The statutory inspection revealed the following lapses in the functioning of the cooperative bank:

*The bank has not adhered to prudential norms and proper provisioning was not done and it has violated RBI guidelines. Its gross non performing assets of Rs 63.2 crore constituted 23.2 per cent of the total loans and advances portfolio of Rs 272 crore. It was also found that the bank had unsatisfactory loan policies and procedures, credit appraisal system and supervision system of credit.

 

*The bank was continuously defaulting in maintenance of statutory reserves and cash reserve ratios. Despite a liquidity crunch, it has sanctioned fresh loans and advances upto Rs 30 crore during July-September 2001.

*With many loan proposals directly recommended by the directors of the bank, advances were concentrated against land and buildings for construction purpose and given to few borrowers. About 124 borrowers held loans worth Rs 170 crore, constituting 62.6 per cent of total loans and advances.

*The bank was facing severe liquidity crunch after Bombay Mercantile Cooperative Bank withdrew its deposits of Rs 120 crore in September 2001.

Meanwhile, the state registrar has ordered an enquiry into the financial position of the bank under section 69 of the multi-state cooperative act and authorised the joint registrar Hyderabad (urban) to conduct inquiry and report.

Meantime, the RBI has sent its executive director Mathur on Tuesday to review the situation. Narsimha Murthy, a leading chartered accountant and an RBI officer have been entrusted the task of undertaking the scrutiny of the books of accounts, securities, cash, documents and records of the bank. The report is expected to be submitted in about three weeks.