I have no doubt and no hesitation to say that RBI and GOI both failed to stop such scams and such broad day loot of the bank.They always preach the sermons and promise to take stringent action against erring persons but always fail in imposing actual punishment to the main guilty and always fail to nip in the bud despite having plenty of so called control mechanism in the system.
We have seen in the past how hundreds of cooperative banks were closed only due to reckless financing made by them and due to wide spread corruption in these bank . These banks failed despite so called strict rules and regulation said to be in force and despite the fact that RBI uses to give certificate of good governance and healthy financial system in the country .
Why?
Not only cooperative banks failed, many regional rural banks failed due to rise in bad debts . When bank become too weak to control , when customers of the bank are agitated and start violent movement against bank officials and when large scale corruption of politicians and official is exposed by some one or the other. Surprisingly ,RBI and GOI then come into action and order merger of these RRBs to their parent bank but they never tried to strike at the root cause of failure of the bank due to their personal and political and financial greed.
Many commercial banks also failed during last few years and GOI did nothing to stop recurrence of such failure but merely ordered merger of these bank with some other strong bank. We have seen in the past how Global Trust Bank, New Bank of India , Sangli Bank,like renowned banks were merged with other banks
Why ?
Only because most of these failed cooperative banks or Regional rural banks or commercial banks or chit funds or NBFC get patronage form some or the other strong political leader.
Officials of RBI and GOI normally sleep and remain dormant controller of banks and think it wise ,safe and prudent to be silent spectator of all irregularities and malfunctioning of these banks as also functioning of financial institutes in general until they are awakened by some outside forces or depositors affected by failure of corrupt bank.However to safeguard their skin, clever officials of so called regulators bodies always use to get certificate of good health of banks from panel auditors . They never bother to verify and ascertain the genuineness of these certificates .
Majority of top ranked officials are made happy by promoters and managers of these banks through costly gifts and cash bribe. Even statutory and regular Auditors appointed to check health of banks are bought by clever officials of banks after extending red carpet welcome to them and after offering attractive bribe and costly gifts for ensuring issuance of certificate of health and for final submission of these certificates to their regulating bodies including Ministry of Finance and RBI
And in this way ,cancer of corruption is allowed to perpetuate grow until it explodes and collapses to end.
Finally a committee is set up to investigate the reasons of failure or to find out the modus oparandi of loot of the bank but action is never taken against any erring officials and to stop happening of such incident in future at other banks because most of them are under patronage of powerful political leaders who were bought during good days of the bank.
This is why story of collapse of banks never ends despite the fact that Indian political leaders and Government of India use to claim every now and then that Indian financial Institutes including banks and chit funds are more safe and sound and there is no risk of failure and no need for depositors to worry.
RBI orders Amanath Bank to cease operations- Business Line ---News -Bangalore 18th May 2013
Tension prevailed at the Amanath Co-operative Bank head office in Shivajinagar on Friday afternoon when hundreds of depositors who had ransacked several branches in the city staged a protest blocking the busy Bowring Hospital Road after the bank shut down its operations.
The shutdown followed a Reserve Bank of India (RBI) circular on Friday directing it to cease all financial activities after the bank reportedly failed to file its report on recovering dues from defaulters. The RBI, in April this year, issued a notice to the bank to restrict withdrawals from each account to Rs. 1,000 in a six-month period. The bank has been told not to accept any deposits till further orders.
Also, while the RBI directed the bank to allow depositors to withdraw only Rs. 1,000 once in six months, the management allowed withdrawal of Rs. 1,000 a day. Following this, the RBI ordered freezing of all accounts till further orders, which resulted in widespread protests by depositors, sources in the bank said.
As the news spread, hundreds of agitated depositors ransacked a few branches and gathered outside the head office in Shivajinagar raising slogans against the management. The depositors have also filed a complaint with the jurisdictional Commercial Street police requesting their intervention to help withdraw their money.
Sources said that the dues to the bank run up to over Rs. 100 crore and the defaulters include top officials and former directors of the bank. “The management is deliberately not recovering the amount as it indirectly wants to push the issue for liquidation. Once the RBI consents for the liquidation, the process of recovery takes a long time due to prolonged legal procedure and thus saves the defaulters from the present situation,” a source said.
Sources pointed out that the big account holders, who knew about this situation, had withdrawn their money while it was the poor and middle class customers who were affected.
The depositors alleged that the mismanagement of the bank’s affair resulted in financial loss.
“Many depositors had saved money in their account for school admissions, marriage, family functions and Haj pilgrimage. Every plan has now gone haywire,” a depositor said.
‘Money is safe’
Meanwhile, the bank’s chairman Naseer Ahmed told The Hindu that the board was meeting several people, including top industrialists and politicians and leaders of the Muslim community, to discuss the next course of action. “We are planning to raise a share capital and try to save the institution. The other option we have is a merger with other bank,” he said.
“Either ways the depositors’ money is safe and we are working hard to bring back the bank on track,” Mr. Ahmed said.
RBI to cancel licences of 26 loss-making cooperative banks -----Live Mint News 13th May 2013
Varanasi: The Reserve Bank of India will shortly cancel licences of 26 loss-making cooperative banks, including 16 in Uttar Pradesh, Deputy Governor K C Chakrabarty on Saturday said.
A capital of Rs 2,000 crore is required for running 16 cooperatives banks in the state and RBI may not cancel the licenses of these banks if the state government supports them, Chakrabarty told reporters on the sidelines of an event here.
Banking is a business, he said and emphasised that it is better to close down such banks if there is no capital.
Such cooperatives banks are not required anymore if 90 percent of depositors' money has been lost, he added.
Chakrabarty further said that these cooperatives banks should be shut down as they have been given many chances to perform well keeping in mind the interest of the investors.
On the new banking licences, he said RBI will consider giving permits to those who submit applications by June.
On usage of fifty paise coin, Chakrabarty said that these coins are still in circulation. RBI may consider stopping its circulation if substantial complaints are received.
He also said that plastic notes will be launched in four metro cities as a pilot project. Based on its success, it will be expanded to other parts of the country.
To another query, Chakrabarty said that the government provides subsidy to the tune of Rs 50,000 crore on cooking gas and to the tune of Rs 5,00,000 crore under other heads .
A capital of Rs 2,000 crore is required for running 16 cooperatives banks in the state and RBI may not cancel the licenses of these banks if the state government supports them, Chakrabarty told reporters on the sidelines of an event here.
Banking is a business, he said and emphasised that it is better to close down such banks if there is no capital.
Such cooperatives banks are not required anymore if 90 percent of depositors' money has been lost, he added.
Chakrabarty further said that these cooperatives banks should be shut down as they have been given many chances to perform well keeping in mind the interest of the investors.
On the new banking licences, he said RBI will consider giving permits to those who submit applications by June.
On usage of fifty paise coin, Chakrabarty said that these coins are still in circulation. RBI may consider stopping its circulation if substantial complaints are received.
He also said that plastic notes will be launched in four metro cities as a pilot project. Based on its success, it will be expanded to other parts of the country.
To another query, Chakrabarty said that the government provides subsidy to the tune of Rs 50,000 crore on cooking gas and to the tune of Rs 5,00,000 crore under other heads .
50 cooperative banks face closure threat--Live Mint news 13th March 2012
50 cooperative banks face closure threat
Mumbai: Around 50 cooperative banks across India may have to stop operations from April if the banking regulator doesn’t extend the deadline set for these lenders to achieve critical efficiency parameters in terms of capital adequacy and net worth.
Of the total, two are state cooperative banks and the rest district central cooperative banks. The state cooperative banks are located in eastern and western India.
If the Reserve Bank of India (RBI) doesn’t extend the deadline, these banks—accounting for roughly 13.5% of the total deposits of state and district central cooperative banks— will have to stop accepting deposits and undertaking other banking transactions.
The closures could put depositors at risk, at least until further clarity emerges from RBI on this, said Prakash Bakshi, chairman of the National Bank for Agriculture and Rural Development (Nabard).
“About 50 banks will not be able to reach the RBI-prescribed benchmarks. If the deadline is not extended, these banks will have to merge with other banks,” he said.
India has 30 state and 370 district central cooperative banks. In March 2010, total deposits of all state cooperative banks and district central cooperative banks stood at Rs 2.31 trillion and advances at Rs 1.54 trillion. Their total assets were worth Rs 3.39 trillion. The non-performing assets as a percentage of loans for state cooperative banks stood at 8.8% in March 2010. For the district central cooperative banks, this was higher at 12.9%.
The figures for fiscal year 2011 are not collated for the industry, but Nabard’s supervision wing has done so for the 50 stressed banks.
In 2008-09, RBI had set the 31 March deadline for cooperative banks to achieve minimum eligibility benchmarks in three years following the recommendations of an expert committee, headed by former deputy governor Rakesh Mohan. These included a minimum capital to risk-weighted assets ratio of 4% by March 2012 and cash reserve ratio (CRR) and statutory liquidity ratio (SLR) at par with commercial banks.
Under current norms, commercial banks need to keep 4.75% of their deposits with RBI in the form of CRR and invest at least 24% of deposits in government securities as SLR.
Apart from these, the cooperative banks should neither have excessive bad loans nor should they have been pulled up by RBI for violations of rules such as misappropriation of funds. Besides, the banks should also have a minimum net worth of Rs 1 lakh.
According to Bakshi, the 50 banks are unlikely to meet these benchmarks in the next two weeks.
“The big task is to see that the deposits of these banks are migrated to some other banks or they are merged with sound banks. We are in dialogue with RBI and the government on all these issues. Since cooperative banks play a vital role in disbursing agriculture credit, their closure could be a blow to farmers,” Bakshi said. Nabard is the nodal agency to regulate cooperative banks and regional rural banks.
On 5 March, agriculture minister Sharad Pawar met representatives of state governments to discuss capital infusion into these 50 banks and chalk out a strategy.
Cooperative banks have been playing a critical role in spreading financial services to India’s remote areas, where commercial banks do not have reach. They have, however, been losing business due to increasing competition from commercial banks. With a view to giving more teeth to the cooperative banking sector, Nabard is currently implementing core banking solutions (CBS) at these banks, which will help their customers transact business at any of their branches. So far, 140 banks have joined Nabard’s CBS platform.
In the past years, RBI has taken punitive action against a number of cooperative banks for violating norms.
Until January, 73 cooperative banks have either been penalized or asked to shut by the banking regulator this fiscal against 44 banks in the last fiscal and 31 in the year before.
Experts said an immediate closure of these banks, though relatively smaller in size, could impact customer sentiment.
“Three years given to them were not enough for these lenders to migrate to the required benchmarks due to unfavourable economic conditions. The regulator should continue to push for stability of these banks and encourage greater efficiency,” said Viren H. Mehta, partner at SR Batliboi and Co. “The current situation needs attention, but any sudden action will impact deposit holders in an adverse manner.”
Anuj Jain, senior manager (banking and financial services) at CARE Ratings, said a mass closure was unlikely.
“I do not think RBI will take any hard decision as many depositors will get impacted. Even if it does not want to extend the deadline, it might give an extension on a case-to-case basis to some of these banks,” Jain said.
Monday, June 11, 2012
Cooperative Bank, Regional Rural Banks and Commercial Bank under Scanner
| Gujarat's urban co-op banks fight Madhavpura's ghosts |
| A decade after the Madhavpura scam, Gujarat?s urban cooperative banks are fighting to win back customer confidence and live another day |
| Rutam Vora & Abhijit Madhav Lele / Ahmedabad/ Mumbai July 4, 2012, 0:39 IST |
On June 1, the Reserve Bank of India (RBI) cancelled the banking licence of Madhavpura Mercantile Cooperative Bank (MMCB), bringing the curtains down on the most controversial bank in the history of urban cooperative banks (UCBs). Though it’s been more than a decade since it was taken for a joyride by former big bull Ketan Parekh, many UCBs in Gujarat are still struggling to regain the lost trust and confidence of depositors.
But Amul is an exception. Owned by the Gujarat Co-operative Milk Marketing Federation, it has grown leaps and bounds to become India’s largest brand of milk and milk products. Its turnover rose to Rs 11,688 crore in 2011-12, from 2,745.74 crore in 2002-03.
Otherwise in the pink with Rs 17,500 crore of deposits, things took an ugly turn when MMCB’s multi-crore stock market scam surfaced in 2001. It all started when MMCB, which got the banking licence on August 19, 1994, and later on became a multi-state cooperative bank from April 1996, resorted to indiscriminate lending to stock broking firms during 1999-2000. It not only violated lending norms set by RBI, but the top management colluded with select share brokers to lend unsecured loans for their investments. The bank’s exposure to the stock market through Mumbai-based share broker Parekh was to the tune of Rs 1,200 crore.
by dkjain49709 » Thu Jul 01, 2010 8:34 am
Government has asked now PSU banks to target urban cooperative banks and advised them to takeover sinking banks. I am unable to understand RBI works as an advisor to keep a man healthy or a doctor to diagnose ailing bank or simply a doctor to conduct post Mortem report of a dead body and submit report. It will not be an exaggeration to say that government in general works like a doctor to submit post mortem report of all dead bodies like scams, terror attacks, fraud ,scandals and forget.
RBI and other regulators first allow banks to loot the money, extend reckless credits, spoil the internal culture and intrinsic value of the bank, promote corruption in credit and Human Resource Management, waiver of loan and so on and in the next phase recommends for infusion of capital to salvage the bank and lastly recommends other big banks to takeover sinking bank.
Some times cooperative banks become out of control and some times some Regional Rural banks or some other time some PSU or private bank. In the past several cooperative banks have closed their shutters. Many Private Banks have been forcibly merged with PSU banks like Punjab National Bank or Union Bank or Bank of India. Even there was a proposal to merge banks like United Bank or U Co bank or Indian Bank.
Government has in the past provided capital as oxygen from time to time to various sinking or weak banks .Even in the last month government has passed a bill to provide Rs15000/ capital infusion to weak banks. But unfortunately it never tries to strike at the root of unhealthy culture and stop political intervention. Inspite of preaching all sermons NPA in banks has been rising speedily though it is concealed at the behest of RBI or Government of India.
The great question arises why and how does RBI fail to nip in the bud and why does it not punish the person who caused and perpetuated corrupt line of action in all fields. Why does it fail to break nexus of politicians in spread of corrupt culture in credit delivery prevailing all over the country in almost all banks? Why does it not punish the chartered Accountants who more often than not sell their signature and blindly certify balance sheets? How a rating agency fails to identify bad banks and alert the regulators in time?
Danendra jain
Many district cooperative banks in UP are on verge of closure:
Shivpal Yadav LUCKNOW: District cooperative banks in 25 districts of the state are on the verge of closure, state minister for corporative Shivpal Yadavdeclared on Monday. Speaking during the cut motion debate in Vidhan Sabha, Shivpal rued rampant corruption and nepotism in the sector which, he charged, was the major contributory factor to the near collapse. SP government, he promised, will take necessary steps to salvage the situation.
The Reserve Bank of India (RBI), Shivpal told the House, is holding back the licence of 25 banks for failing to meet the prescribed criteria and procedural norms. The government, he said, proposes to initiate a dialogue with the Centre and also write to the RBI on issuance as any reluctance or delay would spell ruination for state farmers. The minister slammed the Mayawati regime for rigging election of the cooperative banks in districts to ensure appointments of the favoured one as directors, chairpersons, etc. Shivpal cited the example of how nomination of candidates from the Samajwadi Party was cancelled by the returning officers at the last moment to oblige the ruling party.
The allegation was stoutly rebutted by the BSP MLA and SP turncoat Ranendra Budholiya. Budholiya launched a scathing attack on Samajwadi Party and alleged that its leaders had been using corporative movement to feather their nests and splurge public funds on needless foreign trips. Promptly hooted by colleagues from the treasury benches, he demanded investigation into charges of malpractice and graft that afflict the sector and claimed that even NABARD had stopped sanctioning loans due to the fact.
Charging Mayawati government with criminal highhandedness, BJP leader Hukum Singh told the House how a senior PCS officer arbitrarily rejected the nomination papers filed by all 11 candidates in Muzaffarnagar to pave way for election of a BSP stooge in the elections. Officers who bent rules to please the former government, he said, have now switched sides and hitched on the SP bandwagon. The leader demanded that they be identified and punished. Conceding the demand, Shivpal said the government has already begun the exercise and action would be taken soon. The minister also said that SP government has stocked three lakh metric tonnes in the storage to cater to the growing demand of urea and claimed that this season availability will be no issue unlike the BSP rule when farmers were lathicharged for asking for urea.
Earlier, moving the cut motion in the budget for animal husbandry, Hukum Singh highlighted rampant cattle smuggling across the UP borders. Cattle theft is gone up notoriously in western UP, he said, and claimed that buffaloes yoked to the carts and left unattended even for an hour find their way into the slaughter houses which are doing a thriving business with connivance of the veterinary doctors and the local police. Singh rebutted the claims of Parasnath Yadav that the production of milk has increased in UP and attributed the spiralling graph to adulterated urea concoction and demanded an immediate check of the menace.
http://timesofindia.indiatimes.com/city/lucknow/Many-district-cooperative-banks-in-UP-are-on-verge-of-closure-Shivpal-Yadav/articleshow/14039925.cms
42 cooperative banks
under central bank’s scrutiny for rule violation
Banks put under revival plan in a last-ditch effort to revive their businesses and improve capital adequacy
Mumbai: The Reserve Bank of India has put 42 cooperative banks under a revival programme that involves a thorough scrutiny after the lenders failed to meet critical parameters on minimum capital and net worth.
RBI has barred the lenders from accepting fresh deposits from the public after they missed the 31 March deadline to satisfy the norms.
The programme, known as the monitorable action plan (MAP), is a last-ditch effort by the central bank to revive the businesses of distressed banks.
The banks have till 30 September to revive their businesses and improve capital adequacy.
During this period, the operations of the banks and their business decisions will come under scrutiny. If the banks fail to revive their businesses, the regulator can take punitive action or even cancel their licences.
Of the 42 district central cooperative banks under scrutiny, 25 are in Uttar Pradesh.
Special committees comprising top officials of RBI and the National Bank for Agriculture and Rural Development (Nabard) will monitor the monthly progress of the banks.
“There were about 50 banks which were facing closure threat. Of them, eight, including state-level cooperative banks, have managed to meet the norms. The remaining 42 banks are under MAP till September to work out a revival plan,” Prakash Bakshi, chairman of Nabard, said.
Most of the banks have already submitted their action plans, he added.
If the banks are unable to improve their positions by September, they may be asked to either shut their operations or merge with other banks.
The 50 cooperative banks that faced the threat of closure had total deposits of Rs. 31,242 crore and loans worth Rs. 18,485 crore as of 31 March 2011. These lenders accounted for 13.5% of the total deposits of state and district central cooperative banks in the country.
Updated figures for the 42 banks could not be obtained immediately. Minthad reported this development on 14 March.
India has 30 state and 370 district central cooperative banks. In March 2010, the total deposits of all state cooperative banks and district central cooperative banks stood at Rs. 2.31 trillion and the advances at Rs. 1.54 trillion. Their total assets were worth Rs. 3.39 trillion.
http://www.livemint.com/2012/06/10223640/42-cooperative-banks-under-cen.html
Finance minister to meet state-run banks heads, may discuss credit flow, NPA
http://timesofindia.indiatimes.com/business/india-business/Finance-minister-to-meet-state-run-banks-heads-may-discuss-credit-flow-NPA/articleshow/13990450.cms
NEW DELHI: Amid concerns over moderation in economic growth and rising bad loans, finance minister Pranab Mukherjee will meet on Tuesday with heads of public sector banks to discuss credit flow to productive sectors and review their performance in the last fiscal.
The meeting will take stock of financial performance of the banks in 2011-12 fiscal, sources said, adding it would also dwell upon credit flow to productive sectors.
Besides, focus of the meeting would also be on providing banking facilities to unbanked areas. The Finance Ministry would seek information about the progress on financial inclusion front carried out by individual banks.
The Finance Ministry will deliberate on non-performing assets (NPAs), agriculture loan, credit to infrastructure sector and matters related to human resources in public sector banks, they said.
The Finance Minister has fixed the target for agricultural credit at Rs 5,75,000 crore in 2012-13. This represents an increase of Rs 1 lakh crore over the target for the last fiscal.
Issues on lending to distressed sectors, such as real estate, power, aviation and telecom may also be flagged off during the meeting.
Expressing concerns over rising bad loans, Mukherjee last month asked the banks to take steps to manage their NPAs which has grown on account of economic downturn.
Gross NPAs of public sector banks stood at 3.3 per cent in 2011-12.
Heads of public sector financial institutions like Nabard, Sidbi, NHB, IIFCL and Exim Bank would also attend the meeting.
In 2010, the finance minister had conducted regional meetings, which were attended by PSU bankers along with the concerned chief ministers.
This was with the objective to better understand state- wise flow of credit to the agriculture sector, credit-deposit ratio and loan to weaker section of society among others.
NCP legislator booked for assault in bank faces arrest
HT Correspondent, Hindustan Times Mumbai, May 19, 2013
Nationalist Congress Party (NCP) legislator Suresh Dhas is likely to be arrested soon for vandalising the local branch of State Bank of Hyderabad in Beed earlier this week.
Dhas, who is considered to be close to deputy chief minister Ajit Pawar, allegedly ransacked the bank office on Thursday with his followers and roughed up two of its employees after a heated exchange with the bank manager BM Thigle over loan applications of farmers.
Late on Friday, the Patoda police in Beed district registered a criminal complaint against Dhas, 10 of his followers and 12 unidentified people on charges of rioting, assault and obstructing government work.
Dhas, an MLA from Ashti, had gone to the bank's Patoda branch on Thursday with some farmers to know the status of their loan applications. The farmers wanted the loans for de-silting the reservoirs.
However, the bank had no provision to lend them loans for this purpose. Dhas had a heated exchange with the branch manager, and the bank's security guard allegedly threatened him with his gun.
Dhas’s supporters became furious and started breaking the office windows and damaging the computers. They also beat up two bank employees.
Dhas was recently criticised for pressuring the government to transfer Beed collector Sunil Kendrekar, known for his uprightness, just three months after he had assumed office. Kendrekar’s transfer order was, however, withdrawn following public protests.
NCP leaders have been at the receiving end over several corruption allegations.
Admitting this, party spokesman Nawab Malik said: “We are not shielding anyone. If Dhas is guilty of ransacking the bank, law will take its own course.”
Canara Bank, BoI merge RRBs in Uttar Pradesh--Business Line 20th May 2013
BANGALORE, MAY 20:
Canara Bank has informed the exchanges that it has amalgamated regional rural banks - Shreyas Gramin Bank sponsored by it with Aryavart Kshetriya Gramin Bank sponsored by Bank of India. Both the RRBs are located in Uttar Pradesh.
The ministry of finance (MoF) had envisaged amalgamation geographically contiguous RRBs sponsored by different bank within a state with single sponsor bank which will help in optimising the use of modern technology.
After the merger, the RRB is called Gramin Bank of Aryavart with its head office at Lucknow under the sponsorship of Bank of India
Cobrapost allegations: Nabard chief gives clean chit to co-operative banks --NDTV Profit
Press Trust of India | Updated On: May 19, 2013 13:37 (IST)
Amid allegations of co-operative banks being used as conduits for money laundering, the National Bank for Agriculture and Rural Development (Nabard), which jointly regulates such lenders, has said that it has found no shortcoming pointing towards any such activity.
"Every year we do an inspection and we have not found anything like that," said Nabard chairman Prakash Bakshi over the weekend, when asked about the recent controversy over money laundering.
A probe launched by the Reserve Bank of India (RBI) following allegations of non-compliance with anti-money laundering measures and know your customer (KYC) norms by top private banks has reportedly found that cooperative banks are used as conduits.
Not having the entire bouquet of service offerings, the cooperative banks tie-up with scheduled commercial banks to expand their reach. Co-operative banks can accept cash under Rs. 50,000 from customers (the limit at which reporting to tax authorities sets in). They usually earn commission from larger banks for providing services.
When asked about the misuse of the system and if this amounts to regulatory arbitrage, Mr Bakshi said, "It is the same regulation for everybody. Banking Regulation Act is same for everybody."
Online portal Cobrapost had in March made public a sting operation purportedly showing some executives at three top private banks - ICICI Bank, HDFC Bank and Axis Bank - allegedly agreeing to receive unverified sums of cash and put them in their investment schemes and 'benami' accounts in violation of anti-money laundering laws.
Earlier this month, it had followed up with a similar operation, showing executives at over 20 financial institutions, including State Bank of India and Life Insurance Corporation of India, offering similar services.
The RBI has maintained that no transaction has happened while the sting also does not point to "money laundering".
RBI governor D Subbarao has also said, "RBI is not directly involved... even banks are not directly responsible. They are not expected to inquire about the source of income. It is for government and tax authorities to check money laundering."
Mr Bakshi said Nabard, which disbursed a refinance of Rs. 65,000 crore on short-term agri loans last fiscal, is targetting to take the same number up to Rs. 80,000 crore in the current fiscal year.
Meanwhile, in a first, Nabard, in association with the National Payments Corporation of India, launched the maiden 'kisan' credit card (KCC) debit card' for the customers of the Raigad District Cooperative Bank in the district headquarters of Alibaug over the weekend.
Under the scheme, the maximum loan amount for which a beneficiary farmer is eligible will be loaded on the card and he can withdraw the money as per his requirements. Interest applicable thereof, will have to be serviced.
"Every year we do an inspection and we have not found anything like that," said Nabard chairman Prakash Bakshi over the weekend, when asked about the recent controversy over money laundering.
A probe launched by the Reserve Bank of India (RBI) following allegations of non-compliance with anti-money laundering measures and know your customer (KYC) norms by top private banks has reportedly found that cooperative banks are used as conduits.
Not having the entire bouquet of service offerings, the cooperative banks tie-up with scheduled commercial banks to expand their reach. Co-operative banks can accept cash under Rs. 50,000 from customers (the limit at which reporting to tax authorities sets in). They usually earn commission from larger banks for providing services.
When asked about the misuse of the system and if this amounts to regulatory arbitrage, Mr Bakshi said, "It is the same regulation for everybody. Banking Regulation Act is same for everybody."
Online portal Cobrapost had in March made public a sting operation purportedly showing some executives at three top private banks - ICICI Bank, HDFC Bank and Axis Bank - allegedly agreeing to receive unverified sums of cash and put them in their investment schemes and 'benami' accounts in violation of anti-money laundering laws.
Earlier this month, it had followed up with a similar operation, showing executives at over 20 financial institutions, including State Bank of India and Life Insurance Corporation of India, offering similar services.
The RBI has maintained that no transaction has happened while the sting also does not point to "money laundering".
RBI governor D Subbarao has also said, "RBI is not directly involved... even banks are not directly responsible. They are not expected to inquire about the source of income. It is for government and tax authorities to check money laundering."
Mr Bakshi said Nabard, which disbursed a refinance of Rs. 65,000 crore on short-term agri loans last fiscal, is targetting to take the same number up to Rs. 80,000 crore in the current fiscal year.
Meanwhile, in a first, Nabard, in association with the National Payments Corporation of India, launched the maiden 'kisan' credit card (KCC) debit card' for the customers of the Raigad District Cooperative Bank in the district headquarters of Alibaug over the weekend.
Under the scheme, the maximum loan amount for which a beneficiary farmer is eligible will be loaded on the card and he can withdraw the money as per his requirements. Interest applicable thereof, will have to be serviced.
Finance Ministry looking at merging RRBs with sponsor banks--Business Line news on 11 March 2013
MUMBAI, MARCH 11:
The Finance Ministry may have subtly initiated an exercise to merge the 82 Regional Rural Banks with their sponsor banks.
A recent communication to the chiefs of sponsor banks and RRBs to the effect that RRB officers (Scale I: officer to Scale IV: chief manager) should be deputed to their respective sponsor banks and vice-versa suggests that an integration exercise is being worked out.
The Ministry has directed that 20 per cent of the RRB officers should be deputed to their respective sponsor banks (mainly public sector banks). The RRBs officers who go on deputation have to be replaced with sponsor bank officers. Given that the government is staring at a huge fiscal deficit, disinvestment of its stake in RRBs in favour of sponsor banks would fetch it cash. This would help bring down the deficit, said a senior public sector bank official.
OPPOSITION TO CROSS-MERGERS
With various stakeholders in sponsor banks and RRBs expressing their opposition to the Ministry's proposal for cross-mergers of RRBs, the Ministry may have found a via-media — merger of RRBs with their sponsor banks — to pacify them, say RRB insiders.
In November 2011, the Ministry had come up with a proposal for cross merger of RRBs cutting across sponsor banks in a particular State. The move was aimed at reducing the number of RRBs from 82 to 46. RRBs were established in the mid-1970s to ensure sufficient institutional credit for agriculture and other rural sectors. They are jointly owned by the Government of India (50 per cent stake), the State Government concerned (15 per cent), and sponsor banks (35 per cent).
POLICY CONFUSION
“When it comes to drawing up policies for RRBs, the Ministry seems to be confused. First it wanted sponsor banks to take necessary action regarding operational integration and human resources development. Then it came up with the cross-merger proposal. Now it has come up with this new policy on human resources,” Mr S.K. Bhattacharjee, General Secretary, All India RRB Officers Federation.
He observed that such instructions are creating a lot of uncertainty. Sponsor banks are quite hesitant to take any action on the Ministry's instructions as they are unaware of the unfolding situation.
Pointing to a flaw in the new HR policy prescribed by the Ministry, Mr Dilip Kumar Mukherjee, Secretary General, All India RRB Employees Association, said by the time RRB officers gain professional and technological expertise in sponsor banks through the 3-5 years deputation they will hardly be left with any tenure once they go back to their respective RRBs. “As pay and allowances of the sponsor bank will be applicable, RRBs will end up incurring huge expenditure on salary as sponsor bank officers will work with them,” he said.
RRBS: RESPONSIBILITY OF SPONSOR BANKS
Underscoring the fact that that the Government has made the sponsor banks responsible for the functioning of RRBs and that sponsor banks have incurred huge cost in putting RRBs under core banking solution platform, Mr Bhattacharjee said they should be merged with their sponsor banks. The number of RRBs has shrunk from 196 in the early 2000s to 82 now on account of restructuring and amalgamation of RRBs to improve their financial soundness. According to RBI figures, as of March-end 2011, the 82 RRBs collectively had deposits of Rs 1,66,232 crore (Rs 1,45,035 crore as of March-end 2010) and advances of Rs 94,715 crore (Rs 79,157 crore).
Something must be done by the regulator ie RBI and respective state governments, to keep these banks floating since, considerable financial interest, in terms of deposits and advances are involved. Thanks to Sri Jain Danendra for this exclusive post.
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