P Radhakrishnan, Minister of State in the finance ministry said in the Rajya Sabha that a scrutiny of urban co-operative banks (UCBs) by the Reserve Bank of India has revealed that about 621 UCBs were guilty of violations during demonetization and that the Gujarat has the maximum number of violators.
Maharashtra comes next followed by Tamil Nadu and Karnataka. Interestingly, Maharashtra has the highest number of both UCBs and co-op societies touching a figure of 2.46 lakhs – way ahead of others.
Gujarat has about 62 thousand co-op societies in which the number of UCBs, according to an estimate is 220, out of nearly 1500 UCBs in the country.
Indian Cooperative has always warned the urban cooperative banking sector against violations of the RBI norms by some of the black sheep among them.
The modus operandi in majority of cases is to give loan either to one of the Directors of the board of urban cooperative bank or his relatives. Norms are flouted and the RBI guidelines are thrown to the winds in such cases of blatant favoritism.
Only last week had the Reserve Bank of India cancelled the license of Alwar Urban Co-operative Bank Ltd., Alwar, Rajasthan to carry on banking business. The Registrar of Co-operative Societies, Rajasthan has also been requested to issue an order for winding up the bank and appointing a liquidator.
The Reserve Bank cancelled the licence of the bank as the bank does not have adequate capital and earning prospects. The affairs of the bank are being conducted in a manner detrimental to the interest of its present and future depositors and the present financial position of the bank leaves no scope for its revival, the RBI felt.
Indian Cooperative columns are replete with stories of monetary penalty on this UCB or that every other day. Earlier, the media reports said an FIR of fraud and financial bungling of Rs 2.67 crore was registered against five officials of Bombay Mercantile Cooperative Bank Limited. The complainant was UP Minorities finance and Development Corporation Limited and those who were accused in the FIR included the chairman and managing director of the UCB.
Rupee bank has about 6.2 lakh depositors. The RBI has placed restrictions on the bank since 2013 owing to its poor financial health. It has losses amounting to a whopping Rs 1400 crore.
The story of Madhavpura cooperative bank is too well known to need any recall.
But this narrative should not be taken too far as there are many urban cooperative banks which are doing jobs no one else can do. It is one of the reliable tools for financial inclusion of poor-a cherished dream of Prime Minister Modi.
It is high time the well-meaning cooperators should unite to fight off the evil from amongst them as a few bad examples are harming their reputation as well.