Samata Sahakari Bank, Nagpur goes under

The Reserve Bank of India (RBI) on Saturday imposed a moratorium on Samata Sahakari Bank, restricting depositor withdrawals at Rs 1,000. The limitation sparked a panic run on the bank as depositors thronged branches and mobbed bank staff demanding that they be allowed to operate their accounts.

The police had to be called in by the evening as the bank's management plea that this was only a temporary measure and that the bank is still sound, failed to cut ice with the depositors. Bank staff was manhandled at some branches even as many senior citizens who had deposited their life-time savings in the bank demonstrated in front of one of the bank branches.

This is the second cooperative bank from the region to be placed under such a moratorium, the first being the Nagpur Mahila Sahakari Bank which suffered a similar fate two years ago. Samata Sahakari has seven branches in the city.

The RBI order also asks the bank to adjust depositors' money against any outstanding loan or surety against them. However, the bank can incur expenditure required for day-to-day operations such as payment of salaries, taxes and rent. The clearing house membership of the bank was also suspended.

The RBI, Samata Bank officials said, clamped restrictions as the bank's capital adequacy ratio (CAR) had come down drastically. As per RBI norms the CAR should not be less than 9%, however, it had slipped to 3% in Samata Bank. Samata Bank's paid up capital stands at around Rs 2.75 crore which ideally should have been double the figure for safe banking.

Samata's advances were just 1 crore less than its deposits of Rs 95 crore whereas the ideal credit to deposit ratio has been pegged at 60:40. The statutory liquidity ratio (SLR) had slipped to 18% as against the mandatory 25%.

Non-performing assets (NPAs) were as high as 25% against the RBI guidelines of less than 15%. A loan of Rs 2 crore, which had gone bad, was found to have been disbursed to relatives of A N Narkhede, a director of the bank.

Samata Bank has been categorised as a grade 'C' bank by the RBI. It has accumulated losses of around Rs 7 crore  and since the past two financial years has not been able to pay dividend. Pradip Chaudhary, CEO of the bank, said the bank was still sound and that various methods were being tried to bail it out. "We are studying various ways and conversion of a part of deposits into share capital may also be one of the alternatives. However, this would need prior sanction from depositors," he said.

Chaudhary said the deposit base of the bank was earlier Rs 114 crore but had come down drastically after the Mahila Bank fiasco. The RBI has not yet lifted its moratorium from the Mahila Bank and this has impacted business of all co-operative banks.

"Despite such a situation the bank never skipped paying the depositors on demand. We were in a position to meet all the liabilities and there was no need for the RBI to issue such an order," Chaudhary said.