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.
 

User

COMMENTS

pradip gharpure

7 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.

AThiagarajan

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

vivek

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.

AThiagarajan

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?

REPLY

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.

Nothing ‘unique’ about Aadhaar any more

A proposal approved by the cabinet will constitute a statutory authority to be called the National Identification Authority of India. It’s the new name for UIDAI.

The Union Cabinet on Friday approved a proposal to introduce the National Identification Authority of India (NIAI) Bill 2010 in Parliament.

The bill proposes to constitute a statutory authority to be called the National Identification Authority of India and lay down the powers and functions of the Authority, the framework for issuing unique identification (UID) numbers (Aadhaar numbers), major penalties and other related matters through an Act of Parliament. The proposal by the government is not new, apart from a new name for the controversial Unique Identification Authority of India (UIDAI).

"After the bill is passed in Parliament, the name UIDAI would be changed to NIAI. The rest of the functioning and job of the authority would remain the same," said Awadhesh Kumar Pandey, assistant director general for media, UIDAI.

According to a statement released by the government, the setting up will involve an expenditure of Rs3023.01 crore, which includes project components for issue of UID numbers (called Aadhaar numbers) by March 2011, and recurring establishment costs for the entire project phase, over five years ending March 2014.

The statement tries to provide more information about Aadhaar, but creates more confusion. It says, "The UID project is primarily aimed at ensuing inclusive growth, by providing a form of identity to those who do not have any identity." Does this mean that those who have an identity will not get the Aadhaar numbers? In addition, what about the inclusive growth of other people who already have some kind of identification? There are hardly any answers to these questions.

The statement also talks about strengthening of equity among marginalised sections of society. It is not clear how the Aadhaar numbers would be able to do this. The government claims that apart from providing an identity, the Aadhaar numbers would enable better delivery of services and effective governance. Would this imply that someone from Tembhali village in north Maharashtra's Nandurbar district will automatically receive food under the public distribution system (PDS), when the middlemen have looted the food before it can even reach the shop?

What's more serious is that the government does not say anywhere that the Aadhaar numbers will be issued to the citizens of India. Instead, it mentions that the Aadhaar numbers will be issued to "individuals residing in India and to certain other classes of individuals". This means that immigrants from neighbouring countries, residing illegally in India, would be able to procure such numbers too, akin to the ration card (PDS Card), and become citizens of the country.

Prime Minister Manmohan Singh will inaugurate the ambitious UID project at Tembhali village in north Maharashtra's Nandurbar district this month-end. According to a report from the Press Trust of India, the 12-digit Aadhaar number will be mandatory for all government schemes and will serve as a unique identification number for citizens.

To get the number, citizens are required to produce any of 29 listed documents as proof of domicile. If no document is produced, the district collector in rural areas and municipal commissioners in the urban areas will be authorised to issue an identity certificate to the individual.

User

COMMENTS

Keshav B Bhat

7 years ago

It looks like we indians have aGOVERNMENT, of the fools by the fools and for the fools. What we are we deserve to have it nothing else. all of us donot realise if everybody prospers country will prosper. we want to gain ourselves but dont want to see any one else is gaining or prospering.

All new Ideas come to all our leaders to make themseves populer and make themseves rich by the tax payers money.
Regards,
Keshav B Bhat

mary

7 years ago

sir,

the UIDAI will go down the way other govt. deptt are going.
some JS or so, will take over breeding the redtapism & inefficiency.

New KYD norms: Why are we being treated like criminals, cry out fund distributors

The know-your-distributor norms introduced by SEBI are making distributors see red; some feel that the mandatory biometric verification is stretching things a bit too far

At a time when the assets under management (AUM) of mutual fund companies are dwindling rapidly, market regulator Securities and Exchange Board of India's (SEBI) tough stand on in-person verification of distributors may just tighten the noose around the struggling mutual fund industry. The new know-your-distributor (KYD) requirements have not gone down too well with some distributors, who question the extent of verification as demanded by SEBI.

The KYD requirements have been introduced by the Association of Mutual Funds in India (AMFI) under SEBI's diktat. It is mandatory to comply with the KYD procedure (with effect from 1 September 2010) before applying for fresh ARN Registration/ARN Renewal. Existing ARN holders are required to comply with KYD norms by the end of February 2011, failing which payment of commission will be suspended till ARN holders comply with KYD requirements.

The requirement of biometric verification seems to have irked the sensibilities of distributors the most. They find the requirement for biometric verification rather excessive and invasive of their privacy. One such distributor told Moneylife, "It is an insult to the integrity of a person who is in this field for more than 20 years and doing his job with the utmost sincerity. It is quite disgusting to learn that after all these years you have been treated like a criminal."

Why the distributors are complaining is because they feel singled out as a threat to security. While they are aware that the step has been taken as a counter against a few ARN holders who have misguided investors for their own benefit, they question why other unscrupulous entities that are known to defraud investors are not given the same treatment by regulators.

"Why is there no biometric process for doctors, lawyers, CAs, dentists and other professionals who can do more harm to an individual than an ARN holder? If AMFI and SEBI think that there are cheats in financial markets then why are the stock brokers not compelled to have this biometric process?" asked a distributor. He added, "If the distributor is required to undergo this insulting process then why not the fund manager who has an opportunity to play mischief with investors' money? The ARN holder can only misguide the client but cannot play mischief with investors' funds, whereas the fund manager has an opportunity to do monkey business with investors' funds. Then why is there no biometric process for fund managers?"

The entire procedure of verification is also quite lengthy and cumbersome. Distributors are required to visit the nearest Point of Service (POS) with duly completed KYD application, self-attested photocopies of relevant documents and two self-attested (passport size) colour photographs. They are then required to produce, in person, the original documents for over-the-counter verification at the time of submission of their applications along with self-attested photocopies of the same. The biometric process is to be completed at the POS, at the time of submission of applications for registration or renewal of ARN along with the KYD application form. Distributors will then obtain the acknowledgement from the POS confirming completion of KYD process. Existing ARN holders are required to send a photocopy of the acknowledgement to the AMCs/RTAs confirming KYD completion.

While most distributors are agreeable to the concept of KYD, they have frowned upon the call for biometric verification. Earlier, Ramesh Bhatt, an advisor, told Moneylife, "People who wish to do business in a straightforward way will not hesitate to give KYC details. The biometric issue needs to be reconsidered." Another planner had quipped, "Investor education is still lacking. I don't know how biometric (checking) will curb the intention of mis-selling. I am not averse to KYD but they should come up with simple and practical solutions."
 

User

COMMENTS

Sanju Rao

9 months ago

How many days for Kyd process to get a Arn number

Sanju Rao

9 months ago

How many days for Kyd process to get a Arn number

Praveen Dubey

7 years ago

My father is ARN holder doing business with last 20 year now his aged is 82.
I along with my father go to CAMS indore with all document and KYD application but biometric test is not ok. CAMS employee said that due to old age biometric is not done. I am Computer professional i was complaining that there is some problem in your USB device but they not accepted and my father KYD is not completed We were gone for that only from 700 KM
Any substitute for biometric ??????

R Varadarajan

7 years ago

Sebi wants to drive away the Individual Distributors, in preference to the Corporates, for the simple reason that only such corporate membership would strengthen the hands of Sebi. Since Sebi has lost out miserably and since FM is keen to encourage the Insurance Companies ( for ULIPS ), the reduction and removal of the individual MF Distributors is the only way to ease out the efforts of the Insurance agents with the support of the companies ( they are big players making huge commissions unlike the paltry commissions of MF agents )

MOHAN DHOTE

7 years ago

i want to know status of my KYD Application ,which submited at CAMS,NAGPUR ,before 10 days.I want it's ACKNOWLEDGEMENT COPY by mail soon.thanx

Keshav B Bhat

7 years ago

Dear all,
Today I went to CAMS fort office in mumbai for submitting KYD applicatin and finishing the formalities. it took more than one and half hour to come out even though only two people were before me who were already in process. They wok fro 10.30 to 12.30 and 3.30 to 5.30 Can you imagin how long it will take to all IFAs to complete the KYD? The process is simple veryfying the PAN card, address proof, ARN card Bank account and finger print and making the entries and issuing the acknowledgement. The acknowledment says it isunder prevention of money laundering act. I wonder how any MF distributor can commit money laundering as all the dealings are done by cheques issued by the investors and the cheques are made in the name of FUNDS and no third party cheques are allowed.
Regards,
Keshav B Bhat

girish prasad

7 years ago

WHATEVER WE ARE DOING IS TERMED AS BARKING BY MR. VAIDYANATHAN IN ECONOMICS TIMES OF TUESDAY ISSUE. AS PER MR VAIDYANATHAN WHO IS ON 2ND POSION IN SEBI ALL THE DISTRIBUTORS ARE DOGS WHO ARE OPPOSING THIS BAN?
DONT EXPECT ANY JUSTICE FROM SUCH TYPE OF ILL MINDED PEOPLE.
MR BHATT LIKE PEOPLE WHO ARE NEW HEAD OF AMFI ALSO SURRENDERED ON FRONT OF HIM

jignesh n vyas

7 years ago

Mr Dilip i am not agree to implemen cfp for mf investment because small investor not pay any amt to agent . Indian investor not reday chang his miend. First ben commission to all insurance product.AMC directly collect chq from investore.Mr. dilip all investore invest in pick market. This is indian investor miend set.

REPLY

KESHAV B BHAT

In Reply to jignesh n vyas 7 years ago

Dear Sir,
This shows the mentality of the people like u who are only greedy and think of your pain is only everything. The injustice is done by SEBI and AMFI by baning entry load and telling the IFAs and distributors to collect commission from the investors seperately, for which we have to fight but why do u ask insurance product commissions to be banned. If insurance products commission is banned, the injustice done to IFAs will be over? When i started as IFA i used to meet so many IFAs who were passing the part or full commission to their to get the bussiness and I used to tell them why are u indulging in such bussiness and their answer was in bussiness we have to do everything and so what if I loose fround end commission, still i will be getting trial commiision. Today I hope such people realise their mistake and the whole IFA comunity is suffering because of their acts. In any product the distributors commission has to be included in the price of the product, if not the proct can not be marketed economically and for long, wether it is in INDIA or any country in the world.
Regards,
Keshav B bhat

dilip kumar

7 years ago

I am respecting to this KYD system & also respecting to AMFI & SEBI thinking. It is right way for futurar planning. But why suffer only ARN holder. Major missailing to insurance company & insurance agant. It is require to change whole system.
It is must to implement CFP modal ih every investment.

REPLY

Amit

In Reply to dilip kumar 7 years ago

I somewhat agree with Mr.Jignesh N Vyas.

B V Vijaya

7 years ago

In my response to article New KYD norms: Why are we being treated like criminals, cry out fund distributors there is a mistake which goes negative way because of typographical error. The element be read as MIPs’ are supposed to have 20% equity such that the fund will have better stability compared to either equity OR so called balanced funds & shall give reasonable growth over a period. B V Vijaya 6th Oct 2010

Anil

7 years ago

When on 28th Sept I took all the relevant papers for KYD to CAMS I was told that the work on KYD hasn't yet started. I learnt that it needs to be done with before 1st Oct. 2010. What is the reality?

B V Vijaya

7 years ago

Dear Mr. Roopsingh 30th Sept 10 at 9:10 pm Many people think of pension plan with equity / equity M Funds investments. It should be a combination of Large cap equity fund along with some investments in Balanced funds preferably with lower equity content OR Franklin Templeton Pension Plan OR UTI’s Retirement Benefit Plan [ which are balanced funds in their nature ] & a small investment in Income funds. With increasing are alternate year the portfolio should be balanced OR reagmented. The whole kitty should be made either a MIP which has a small equity content to fight inflation OR convert to an income fund with a supporting 5 to 8% amt in large cap fund which has a good resilience [stability ] to capital market swing. From the income fund make STP such that the investor gets a fixed income like salary. Every 3 years shift some proceeds of equity fund to income fund to beat inflation. A simple programme could be made in excel sheet for this. NPS does this with a combination of equity & debt funds. Publications of Value research On Line will help you in this regard

About market ups & down of Japan & other countries. This has happened in those countries. Indian markets & regulations are far better than that of those countries. No doubt there may be some loop holes etc. as happened during Harshad Mehta & Parekhs regimes. Norms of RBI has been appreciated by US Pres.Obama & has said

B V Vijaya

7 years ago

Most of the time the responses about M Fund business are about the commissions. There is much more than this in the field which has not been attempted to solve OR rationalize in the industry. Some of them are mentioned below.

• Service Tax. Whether the advisor is crossing the limit of 8 lks or present 10 lks all AMC’s deduct the service tax & only balance is paid to advisor. Instead of this all AMC’s can deposit the so collected service tax to AMFI under individual ARN and as and when the advisor crosses the limit the same could be remitted to excise dept. For all those who are below the threshold limit the same could be refunded to individuals by AMFI.

• In case of death claims each AMC has its own norms.

• For change of address as well for Bank mandate each AMC has its own norms.

• For signature verification/updation, there is no proper common format with AMC’s

• Rationalisation of Application forms & SOA’s is not done. Lot of space is wasted in the format. AMC’s send a letter mentioning the valuation of investment which reaches the investor after months of the valuation date. This has to be received by the investor within 10 days of printing.

• Balanced funds which are supposed to have equity content of 40% & near by have more than 70 to 75% which is against the ethics & has been made to gain the Capital gains Tax advantage.

• MIPs’ are supposed to have 20% equity such that the fund will not have much stability & to reasonable growth over a period.

• Self declaration to AMC’s every financial year. This is a matter of past but AMFI could have done as explained here. Instead of submitting the self declaration to all the AMC’s it could be submitted to AMFI where in any AMC can find out the status of the advisor.


The question rises that what has been done by AMFI which is supposed to monitor these & similar matters. Otherwise investors will think that AMFI is another toothless paper tiger.

I request the distributor family should rise to the cause & get things rationalized.

REPLY

Keshav B Bhat

In Reply to B V Vijaya 7 years ago

Dear sir,
Everything you wrote can be followed up and solved provided the IFAs are able to servive and continue in the bussiness. Ofcouse few people are boasting that they charge to the clients but do they give the statistics of their client base, what way they are charging to the clients, how many clients accept their terms and pay after getting their advise.
It is eassy to say to say clients has to pay for advise but the people who work on the feild know the reality. Further if the industry has to servive it has to have +ve growth in mobilisation of funds and retuns but today inspite of having a good returns there is only -ve growth on mobilisation on equity funds. If a few people are able to charge to their clients and suceed in this feild the industry can not servive ,so every IFA has to realise that he or she is doing good is not enough as the industries servival depends on most of the IFAs doing good bussiness.
regards
Keshav B bhat

Roopsingh

In Reply to B V Vijaya 7 years ago

you have raised very good points which must be addressed-but to whom?no one is ready to listen to IFAs who are crushed by dictatorial attitude of SEBI and AMFI is just a body of some big AMCs who look for their self interest-who is bothered to all these points?if some one who really wants welfare of MF industry gets to work for MF industry-he will surely consider points which are important-you have missed one important point of online trading platform for IFAs excusively for ARN holders-which should be made available if AMFI wants to reduce costs for IFAs and reduce investors expanses-present model consumes lot of time and paper work and conveyance expanses of MF IFAs-

B V Vijaya BE CIS

In Reply to Roopsingh 7 years ago

Dear Mr. Roopsingh I have personally talked on these matters & on open forum for advisors to Mr. A P Kurian, Chairman AMFI. About Pension Plan thru M Funds he told me it is a very tough matter. Today you have NPS with two options which are very good conceptually. I was doing this my humble way. There are certain points which are pragmatic & left to individual. I also gave him a model SOA which was answering for inclusion of units accumulated each year in SIP, mentioning clearly the dividends earned & paid during the course of time in addition to the present information. Lot of space is wasted in the present layout of space & increase in the consumption of stationary which reduces the profit. Each SOA costs quite heavily along with courier charges.

Besides I wish that advisors should develop the habbit of reading professional mabazines & study the individual investments.

You can call on me at 98452 50844

Roopsingh

In Reply to B V Vijaya BE CIS 7 years ago

Dear B V VIjayaji-thanks for replying-in my personal view Pension plan thru MF schemes can be good option-but equity schemes are always riskier in longer term and they can never be relied-Japan's NIkkie index which was 40000 3 decades ago is hardly 9000 now-because of basic changes in economy-so we can never bet that our markets will be good for next 30 yrs-we cant be sure even for next 10 yrs-so i think fixed interest plans must be included in any pension related plan-my contact no is-08866381360

Amit

In Reply to B V Vijaya 7 years ago

Please shed some more light on service tax. You have written about 8/10lks. Is that amount mobilized in a financial year ? Or amount of brokerage received by the distributor?

B V Vijaya BE CIS

In Reply to Amit 7 years ago

Dear Amith It is the brokerage one gets accounted here. Call me on 9845280844 for any more information

B V Vijaya

In Reply to B V Vijaya BE CIS 7 years ago

My Mbl No. is 98452 50844 There was a typographycal error in my previous reply. Sorry for the mistake

Roopsingh

7 years ago

Yes friends-Mr U K Sinha was one of person who was very enthusiast about DIRECT and ONLINE business and he tried to promote them aggressively-he accepted the idea of ONLINE TRADING from exchanges willingly-but after few months he realised that all these Techniques wont work and IFA were essential for MF business-so he changed his voice towards IFAs support-same is case with HDFC AMC which were pioneers of all this newer techniques of sidelining IFAs-their roles were exposed-but after 3 years of continuous bleeding of AUM they have realised ground realities that without mediator(IFAs) their business cannot run-so now all are cursing SEBI with equal volume-but AMCs are equally blamable for all these happenings-and their role was always suspicious-but i am sure they have realised ground realities and would not go against IFAs now-because every possible act has been trialed at IFAs and now nothing worst can happen.

Amit

7 years ago

Is anybody here renewed his/her ARN ? Now we have to go through a refresher course from NSE by paying Rs.1500. Then with that certificate we have to approach AMFI for ARN renewal, by paying Rs.2500. So total cost is Rs.4000. AMFI is fleecing us ! I only sell mutual funds and I have no other income. In the last one year I received approximately Rs.80000 as brokerage from various AMCs. None of my clients paid me any consultancy fee. After deducting my expenses and after running my household, how much money is left with me? If I do not renew my ARN, they will not pay me any more ! Now I have to borrow money ! SEBI, AMFI & NSE think we are thieves, cheats and quite wealthy !

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