RBI shuts down Madhavpura bank

The scam-hit Madhavpura Mercantile Cooperative Bank (MMCB) breathed its last on Monday. Eleven years after MMCB got paralyzed in 2001 due to illegal loans, Reserve Bank of India (RBI) has cancelled its banking operations license. "RBI has cancelled license of the bank. As MMCB was a multi-state cooperative, the matter will rest with the central registrar of the cooperatives who will decide on the fate of the bank and its depositors," said MMCB chief executive officer B K R Maruthy. As on date, the bank has to recover more than Rs 1,100 crore out of which Rs 800 crore is from Ketan Parekh and various companies of Shirish Maniar and Mukesh Babu. MMCB still owes its depositors more than Rs 700 crore, out of which more than Rs 550 crore belong to around 50 cooperative banks of the state. "Around 70% advances of the bank are without any security. MMCB owes more than Rs 100 crore to individual depositors and the rest to institutional depositors. However, it is up to the central registrar to help the depositors get back their money," said a MMCB official. Not convinced with the bank's recovery measures, RBI had in March this year issued a show-cause notice to MMCB, asking why its license should not be cancelled. The bank was currently under the board of administration chaired by former IAS officer Radha Singh. MMCB board was hoping that some corporate or individual will come forward to buy out the bank. However, given its huge advances, investors continued to avoid it. "The central registrar will have an option to liquidate the bank and safeguard the depositors' money. In Gujarat, many co-operative banks have resurrected themselves, but MMCB failed to stand up," said Dilip Raval, registrar, Gujarat co-operative societies. Cancellation of MMCB's banking license has put a question mark on several other cooperative banks. "In 2001, when the MMCB bubble burst, several other co-op banks were on a shaky ground. The deposits with co-op banks in state which was Rs 17,700 crore in 2001 dipped to Rs 14,400 crore in 2006. But co-op bank sector in Gujarat is stronger today and its deposits stand at Rs 22,000 crore," said Jyotindra Mehta, chairman, Gujarat Urban Cooperative Banks Federation.