Citizens' Issues
Maharashtra’s apex co-operative bank in financial turmoil

The nodal bank, a stronghold of the Congress-NCP combine, is in deep financial trouble due to its suspicious loan distribution to some of its favoured co-operative banks as well as some loss-making sugar co-operative factories

Maharashtra State Co-operative Bank Ltd (MSCB), the nodal bank for all co-operative banks in the state, is in deep financial trouble due to its suspicious loan distribution to some of its favoured co-operative banks as well as some loss-making sugar co-operative factories.

The apex co-operative bank is scheduled to celebrate its centenary year next month in Pune in the presence of president Pratibhatai Patil and Union agriculture minister Sharad Pawar. The majority of the directors on the bank's 'jumbo' board (44 elected and 33 appointed, a total of 77 directors) belong to the Pawar-led Nationalist Congress Party (NCP). Some ministers from the ruling Congress-NCP combine like Ajit Pawar, Rajendra Shingane, Diliprao Deshmukh, Madan Patil, Hasan Mushrif and powerful leaders such as Vijaysinh Mohite-Patil, Sadashivrao Mandlik, Yashwantrao Gadakh, Prasad Tanpure, Jaywantrao Awale and Dilip Sopal are directors of MSCB.

For FY10, the bank's auditors, Joshi Nair and Associates, have given a 'D' grade to MSCB as it could score only 31 marks out of 100 based on various parameters. As per the provisional figures provided on the bank's site, for FY10, its gross non-performing assets (NPA) are 20.9%. However, while converting the same into net NPAs, the bank has shown the figure at 7.7%.

Although the auditors refused to share the audit report with Moneylife, according to some media reports, politicians are pressing hard to change MSCB's audit grade to 'C' from 'D' as a damage control measure. The bank has shown deposits of Rs21,500 crore and a net profit of Rs2.83 crore. However, according to the audit report, the bank had to suffer a loss of Rs1,070 crore, mainly due to NPAs.

The bank had to make a provision of Rs768 crore for the NPAs, but it failed to do so. In addition, for the NPAs, it made a provision of around Rs144 crore from its cash reserve instead of showing the same in the profit & loss account.

Banks in India are required to maintain a Capital Adequacy Ratio (CAR) of 9%; however, MSCB's CAR is 8.66%. In the audit report, the bank was able to score just one mark out of 48 marks that are assigned to CAR, loan worthiness, management and income, together. This was the main reason why the bank scored a 'D' grade in the auditor's report.

The MSCB is the apex co-operative bank in the state since 1954 and has initiated major schemes for the co-operative banking sector in India. It has been helping agricultural credit co-operatives and agricultural processing co-operatives. The bank provides re-finance facility to District Central Co-operative Banks, which cater to the agricultural sector.

It also promotes finance to artisans and agro-industrial co-operatives - especially sugar factories and spinning mills by providing them medium-term loans as well as interim loans.

Traditionally, MSCB has been a stronghold of the Congress-NCP. Even the efforts of the then ruling Shiv Sena-BJP combine in 1998 to take control of the apex co-operative bank had failed. The combine's effort to appoint an administrator for MSCB did not materialise at that time.

Earlier, in March, all parties in Maharashtra joined hands for the MSCB elections and got their representatives elected by a seat-sharing formula. This shows why despite very strong 'strictures' from the auditors, no one, including the opposition parties, is willing to speak about it. Given the political pressure and involvement of all parties, one should not be surprised if the Maharashtra government bails out MSCB from this financial mess.



pradip gharpure

6 years ago

Interesting piece of information. What else can people expect when the politicians are using funds or rather wasting public money in the name of agriculture and allied activities in Maharashtra. Highly shameful performance. RBI should strictly monitor this case, take actions against those invoved in loot of public funds.

Rajeev Divekar

7 years ago

Kalai Tasme namaha:!

suresh thakkar

7 years ago

if possible, go through the local hindi daily news papers of nagpur dated 29th sept. There is a news regarding this bank and its sound financial position. I have tried to bring the notice regarding the turmoil in the bank to a renouned newspaper but all in vain. Nobody can do to prevent all these. How can we bring these to the notice of general public?

Sancia Sequeira

7 years ago

It should not come as a surprise that all these 'politically' held banks are a sure means for defrauding the country with the complicit connivance of the government. Why don't citizens wake up to the fact that this is systematic 'robbing' of taxpayer's money.


7 years ago

What I said is that there is an urgent need to review the requirement and perhaps stipulate any public sector bank...

suresh thakkar

7 years ago

its a breaking news for us. thanks


7 years ago

Looking to the no of directors on the board and most of them are politicians, what else can you expect? First it is BCCI, then IPCL then Kalmadi and team (CWG) and now MSEB. Corrupt politicians can not give anything better than this. What RBI was doing all these years? The NPAs must have been build up over the years? Is the rule different for organisations run by politicians? Moneylife we are with you in your efforts to cleanup the system. Keep up the good work.


7 years ago

In the context of this report, don't you think that there is an urgent need for the requirement that the Housing Coop Socities should have their funds with the coop banks?


Narendra Doshi

In Reply to AThiagarajan 7 years ago

As far as I know, smartly, it is MANDATORY to park housing society funda ONLY in MSCBank.

Narendra Doshi

7 years ago

Moneylife should continue to keep up the chase until positive improvements get seen, however long it may take. I am sure you will be able to find supporters for your efforts though it is indeed a tough job. MSCB is the captain of all cooperative banks in Maharashtra & hence stupendous efforts are required as a large stake is involved. Wish success in cleansing the rot.

p v maiya

7 years ago

No surprise at all. Most Coop Banks have the same story and they all will be bailed out by the State and Central Govts of any political hues as their leaders are the beneficiaries of the current system, particulary of the dual supervision by the Registrar of Coops who is a ploitical appontee and the RBI, a helpless onlooker with so many crooks running the coop banks. India is run by politicians and for themseve only.

After 3G and Mobile Number Portability, what's next for telecom companies? -II

Intense competition, falling revenues and incremental expenditure have affected the balance sheets of all telecom operators. Post 3G and MNP, they will have to either consolidate or diversify in order to survive

With the imminent launch of third generation (3G) network services and mobile number portability (MNP), Indian telecom companies are now gearing up for the next big move. In the first part (, we saw how the government and telecom industry are preparing for the merger and acquisition games under the exit route policy.

While it is said that some new entrants are easy prey for bigger, cash-rich players like Bharti Airtel, there are incumbents who may be ready to sell their part or complete business. In order to reduce its debt burden, Reliance Communications (RCom) is already talking about a stake sale. Although its tower sale deal with GTL did not materialise, RCom for sure needs to scout for other buyers at the earliest.

Citing RCom management, Ambit Capital Pvt Ltd, in a note said, "The company intends to offload stake in the tower company, which may be followed by strategic stake sale in RCom. Though we believe that the stake sale will result in deleveraging the balance sheet, we prefer to wait until further clarity emerges on the same." 

RCom's effort to sell its towers was nothing but an attempt to diversify part of its non-core business. Towers, unless rented out to other companies are nothing but dead assets for any company - especially for mobile operators, it is a huge burden in terms of revenues. In case of RCom, the hiving off of the tower business to another company and then selling it to other parties should be seen in this context only.

The best example of diversification among telecom operators is Bharti Airtel. Long before other companies could wake up to the reality of the tariff war and subsequent intense competition, Bharti started spreading its wings in overseas markets. Once upon a time, both RCom and Bharti were in the race to acquire South African Mobile Telephone Networks SA (MTN), which did not materialise due to various reasons, including last minute changes in regulations in India and South Africa.

While RCom decided to stay away from any acquisition, Bharti continued its search and grabbed the African operations of Kuwait-based Zain for $10.7 billion. The deal, however, led to a huge debt burden of about Rs50,000 crore for Bharti. At present, the company is burdened with a debt of around Rs65,000 crore due to the Zain acquisition and auction and launch of 3G services in India.

Bharti Airtel is planning to sell mobile phone towers of its African operations to its unit Bharti Infratel, in order to raise badly needed cash and taking a big step towards replicating the outsourced business model that has underpinned its growth in India. The value of the towers is expected to be around Rs12,000 crore to Rs15,000 crore.

Kisan Ratilal Choksey Shares and Securities Pvt Ltd, in a research note said, "The move is positive for Bharti considering that it will improve the cash position of the company, significantly reducing net debt position of the company. Debt position of the company is expected to reduce to Rs50,000 crore after repayment of money borrowed for Zain's acquisition. At the same time, by handing over the operation of its phone network, towers and information technology services, the company will be able to focus on its core mobile phone service business in Africa."

While hiving off its non-core business, Bharti is also venturing into the mobile handset business. The business is crowded, with a new company entering the market almost every other day. A number of these companies procure handsets from China and sell it in India using their own label or brand. Despite the stiff competition there is growing demand, especially for handsets in the price range of Rs2,000 to Rs6,000. India's annual shipments for mobile handsets are about 130 million units.

Bharti's group company Beetel has launched eight mobile handsets in the price range of Rs1,750 to Rs7,000. In the first phase, the company is targeting select regions like Delhi, Haryana, UP and Uttaranchal, Rajasthan, Punjab and the seven north-eastern states through its 4,000 outlets.

The company plans to extend its services throughout India by FY11.

Consumer electronics giant Videocon has also entered mobile services as well as the handset business. Although the figures for its mobile handset volumes are not available, during August it added 3.7 million new subscribers.

Sistema Shyam, which operates under the brand name of MTS, has also come out with its own handsets in the CDMA category. Currently there are three operators, RCom, Tata Teleservices (Tata Indicom) and MTS, which offer CDMA mobile services in India. Often, CDMA handsets are sold in a 'locked' status; the same cannot be used with another operator. This may have prompted MTS to offer its own handsets.

Bharti and Videocon offer their direct-to-home (DTH) TV services under a similar brand as that of their mobile services, thus leveraging maximum brand value. RCom and Tata Indicom do not have that advantage as it's not their own brand but sister concerns that offer the DTH services, namely Reliance Big TV and Tata Sky. The DTH venture of Bharti also ratifies its diversification under one brand theory.

On the one hand, telecom players are seeking to de-leverage their balance sheet through sale of their non-core assets (evident from Idea and RCom seeking to sell stake in their tower business). On the other hand, looking at the intense competition in Indian markets, some players are also following the footsteps of Bharti Airtel in diversifying their presence in other regions outside India. Whether diversification of businesses would help the survival of telecom companies, only time can tell.


Related Story:

After 3G and Mobile Number Portability, what's next for telecom companies? -I


Personal finance Monday

DSP BlackRock MF launches DSP BlackRock FMP-3M-Series 21; IDFC Mutual Fund unveils IDFC Fixed Maturity Plan-Monthly-Series 25; Reliance MF floats Reliance Fixed Horizon Fund-XVI-Series 1; Pranab Mukherjee launches LIC's 'Swavalamban' Pension scheme

DSP BlackRock MF launches DSP BlackRock FMP-3M-Series 21

DSP BlackRock Mutual Fund has launched DSP BlackRock FMP-3M-Series 21, a close-ended income scheme. The Scheme has a maturity of three months from the date of allotment. The investment objective of the Schemes is to seek capital appreciation by investing in debt and money market securities. It is envisaged that the Scheme will invest only in such securities which mature on or before the date of maturity of the Schemes. The Schemes may also use fixed income derivatives for hedging and portfolio balancing.

The Scheme offers two options - growth and dividend (payout). During the new fund offer (NFO), the units will be offered at face value of Rs10 per unit. The issue opens on 27th September and closes on 28th September. The minimum investment amount is Rs10,000. Dhawal Dalal is the fund manager. CRISIL Liquid Fund Index is the benchmark index.

Dhawal Dalal, senior vice president & head-Fixed Income, DSP BlackRock Investment Managers, says, "The FMPs with three months maturity are ideal investment avenues for investors, who have short-term cash surplus and are looking to take advantage of attractive money-market rates. These plans also provide good yield pickup of around 75 basis points over average returns of liquid funds/liquid plus funds."

IDFC Mutual Fund unveils IDFC Fixed Maturity Plan-Monthly-Series 25

IDFC Mutual Fund has launched IDFC Fixed Maturity Plan-Monthly-Series 25, a close-ended income scheme. The investment objective of the Scheme is to generate income by investing in debt and money-market instruments maturing on or before the maturity of the Scheme.

The Scheme offers growth and dividend options. The exit load for the Scheme is nil. During the new fund offer (NFO), the units will be offered at face value of Rs10 per unit. The issue opens on 27th September and closes on the same day. The minimum investment amount is Rs10,000. The minimum target amount is Rs1 crore. CRISIL Composite Bond Fund Index is the benchmark index.

Reliance MF floats Reliance Fixed Horizon Fund-XVI-Series 1

Reliance Mutual Fund has launched Reliance Fixed Horizon Fund-XVI-Series 1, a close-ended income scheme. The investment objective of the Scheme is to generate regular returns and growth of capital by investing in government securities and other fixed income/debt securities maturing in line with the time profile of the Scheme with the objective of limiting interest rate volatility. The tenor of the Scheme is 369 days from the date of allotment.

The Scheme has two options - growth and dividend (payout). The exit load for the Scheme is nil. During the new fund offer (NFO), the units will be offered at face value of Rs10 per unit. The issue opens on 27th September and closes on 28th September. The minimum investment amount is Rs5,000. The minimum target amount is Rs20 crore. CRISIL Short Term Bond Fund Index is the benchmark index. Amit Tripathi is the fund manager for the Scheme.

Pranab Mukherjee launches LIC's 'Swavalamban' Pension scheme

Union Finance Minister Pranab Mukherjee launched 'Swavalamban', a pension scheme for the unorganised sector at Raghunathganj, in Murshidabad, West Bengal on 26th September. The minister also distributed PRAN (Permanent Retirement Account Number) cards to a few beneficiaries. Swavalamban Yojana is administered by Pension Fund Regulatory and Development Authority (PFRDA) and Life Insurance Corporation of India (LIC) is the facilitator.
The scheme aims to cover the unorganised sector under the New Pension System from 60 years. Members of unorganised sector aged between 18 years to 55 years shall be included under the Scheme that provides for minimum monthly contribution Rs100, minimum annual contribution Rs1,000 and maximum annual contribution Rs12,000 per member.

Under the Scheme, government contribution will be Rs1,000 per annum for financial 2010-11, and this Scheme shall be available for another three years.


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