Reports of financial turmoil in MSCB lead to panic among co-operative housing societies

They are withdrawing their funds from the apex co-operative bank; activist calls for awareness of consumers’ rights

Some co-operative housing societies are worried over reports about the financial mess in Maharashtra State Co-operative Bank Ltd (MSCB), and they have started to withdraw they money from the bank or are considering doing so soon.
Yesterday, Moneylife had reported that 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 and some loss-making sugar co-operative factories. (Read:
Nagesh N Kini, chartered accountant and secretary of Mahim Co-operative Housing Society, told Moneylife, "We have moved our money from the bank, because if something happens to this bank, at the most, you'll get Rs 1 lakh deposit insurance cover and that too doesn't come easily. It's advisable for people to move the money from there to stronger co-operative banks or public sector banks."

The apex co-operative bank has been found to have misreported facts and has been given a 'D' grade for the financial year 2009-10 by its auditors, Joshi Nair and Associates. 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 has suffered a loss of Rs1,070 crore, mainly due to non-performing assets (NPA). As per the provisional figures for FY10 provided on the bank's website, NPAs are 20.9%. While converting the same into net NPAs, the bank has shown the figure at 7.7%. A majority of the directors of MSCB belong to Sharad Pawar's Nationalist Congress Party and many of the others belong to some of the other mainstream parties.

Vinod Sampat, advocate and founder, Vinod C Sampat and Co, said that the profit claimed by MSCB was nothing but "window dressing." He said, "Co-operative banks are not following proper laws and it is not run on a professional basis. There is lack of accountability and they are surviving because of monopoly and patronage of the co-operative department. No one likes to invest in a co-operative bank, but they are forced to do so under the statutory rules. There is a lot of political interference also. It is full of double-standards."

Mr Sampat was critical of the NPAs reported by the bank. "Anything becoming an NPA is a clear example of the casual approach of the bankers. In one day, the account will not become an NPA. There has to be continuous defaults for an account to become an NPA," he said. "When an amount is not being paid, why should there be political patronage? One of the basic reasons for NPAs is inefficiency and political patronage."

Mr Kini's Mahim Co-operative Housing Society is among the oldest in central Mumbai, and as MSCB was the only bank available to them when the society was set up, they opened an account with the bank. According to Mr Kini there are thousands of housing societies in Maharashtra that have their money locked up in MSCB. "Earlier, according to co-operative laws, you had to put your money in a co-operative bank only. But, now one has the choice of banking with a stronger co-operative bank, such as Saraswat Bank, or with any of the public sector banks."

SS Pai, advocate, S.S. Pai & Co., however, called for a "middle path" approach to resolve the crisis. "We have to go to the root cause of the problem and see whether we can have a middle path, so that there will be no political revenge. In future, if they are diverting funds to sugar co-operatives, we should stop them. Now, we should see that the bank survives after taking strong action. Maybe the Reserve Bank of India should call them and tell them to improve, and take stern action as the last resort."
Mr Pai pointed out that the sugarcane industry should be modernised. "If the bank survives, then also the industry survives. Otherwise, what will happen is that if the bank goes into trouble, small depositors will lose their money. So let there be no political revenge and let us have the best possible solution," he said.

On the NPAs reported by the bank, Mr Pai said that the focus should be on development and not entirely on NPAs. "Admitted, NPAs are high. But we are a developing country. Money in a stock exchange and money in the corpus of a bank are like lockers. They don't lose anything unless someone is using that money in an improper way. More than NPAs, we should think of development and look forward. Chinese banks have so much NPAs but they have moved forward. We should take precautions and move forward."

Mumbai-based consumer activist, Achintya Mukherjee, has called for awareness regarding the crisis in the Maharashtra apex co-operative bank. "Many consumers are not aware of this as many leading newspapers have not even carried the news," he said.



Prashant Bhat

7 years ago

Journalist Prashant Bhat r/o Vashi, Navi Mumbai had filed a complaint with CBI (Anti-Corruption Wing), Mumbai against the Maharashtra State Co-Operative Bank Limited (“MSC Bank”) illegally operating without having a mandatory Banking Licence under section 22 of Banking Regulation Act, 1949 from Reserve Bank of India. CBI has forwarded the said complaint to the General Manager (Vigilance) of Reserve Bank of India, Mumbai for further appropriate action..

Prashant Bhat

7 years ago

Journalist Prashant Bhat r/o Vashi, Navi Mumbai Maharashtra had filed a complaint with CBI (Anti-Corruption Wing), Mumbai against the Maharashtra State Co-Operative Bank Limited (“MSC Bank”) illegally operating without having a mandatory Banking Licence under section 22 of Banking Regulation Act, 1949 from Reserve Bank of India. CBI has forwarded the said complaint to the General Manager (Vigilance) of Reserve Bank of India, Mumbai for further appropriate action..

Prashant Bhat

7 years ago

Maharashtra State Co-Operative Bank Limited (“MSC Bank”) is illegally operating without having a mandatory Banking Licence under section 22 of Banking Regulation Act, 1949 from Reserve Bank of India... President of India Smt. Pratibhatai Patil also attended the centenary ceremony of the said “unconstitutional” MSC Bank at Pune on 11th October, 2010 as Chief Guest...
All the police authorities including concerned MRA police station, Director General of Police (Anti-Corruption), CBI (Anti-Corruption Branch) everybody well-aware of the said illegality.. No action..!!

Ab mere saath 3 baar bolo -. Jai Hind ! Jai Hind !! Jai Hind !!! Dhanyawad...

Prashant Bhat, Vashi, Navi Mumbai (Ph.9323001952)

kishore ghiya

7 years ago

RTI act of 2005 is applicable to all coop banks kerala high court judgement is very cleaCooperative sector leaders have to come forward and ask for crucial information also apply rti to reserve bank and ask for main observation of inspection reports. Force bank to hold annual GM in presence of members and not delegates as they are doing in gujarat and remove the directors who are connected indirectly with the npas.
Without educating rti act to members nothing will happen.
Madhavpura scam wa between bank of india and ketan parekh rbi ahmedabad office knew two years before it went down. The regional manager of urban bank at rbi gujarat i do not know whether he has been punished.
the shareholders and depositors are to be blamed for being inactive.Earlier they learn to protect their better it is no news paper will carry story of mismanagment by any banks. Yeh india hai bhai


7 years ago

It seems Mr. Pai has some special interest in sugar industry.Pal Kurla closed down but Maruti/Tata is having aca car. Let Others run the sugar industry.Balls with sugar industry. It is full of suspected currept activity. Our money is hard earn.I donot know about Mr.Pai.If govt.Babus., RBI donot take action early. we will be forced to withdraw

Narendra Doshi

7 years ago

Mr. Pai's suggestion is the way to go about this.

India Inc raises $1.09 billion in August through ECBs/FCCBs

Mumbai: India Inc raised nearly $1.09 billion overseas during August, 2010 via External Commercial Borrowings (ECBs) and Foreign Currency Convertible Bonds (FCCBs), reports PTI quoting the Reserve Bank of India (RBI) data.

Around 50 companies raised $87,44,95,019 through the automatic route for various projects, while $21,49,12,149 was raised by five companies under the approval route.

Essar Shipping Ports & Logistics raised $280 million in under the automatic route for its overseas acquisitions.

Adani Power Ltd raised $175 million in two tranches under the automatic route for its two projects.

ECBs are used as additional source of funding by Indian corporates to build capacity and raise fresh investments to augment the resources available domestically.

Corporates, registered under the Companies Act, 1956, can access ECBs, up to $500 million in a financial year, under the automatic route. The ECB, which is not covered by the automatic route, is considered under the approval route on a case-by-case basis by RBI.

Foreign Currency Convertible Bonds (FCCBs) are also governed by norms similar to ECBs.

Other major raisings in August under the automatic route were done by offshore drilling major Jagson International ($42.3 million, for import of capital goods), pharma firm Teva API ($30.5 million, for modernisation) and Ranbaxy Laboratories ($30 million, for overseas acquisitions).

Under the approval route, Export-Import Bank of India raised $150 million for onward lending. Besides, Damodar Valley Corporation raised $32.7 million, for a power project; while the National Aviation Company of India raised $24 million for import of capital goods.


Tuesday Closing Report: Stuck in a sideways logjam

Breaking its two-day winning steak, the Indian market ended flat with a negative bias. A high degree of choppiness, ahead of the expiry of the September futures and options (F&O) contract, was the characteristic of today's session. 

The local market opened steady on unsupportive cues from the global arena. A high degree of volatility was seen ahead of the expiry of the September futures and options (F&O) contract, due on Thursday.  The indices dipped into the red in early trades but recovered in the mid-morning session. However, selling pressure in the realty, fast moving consumer goods (FMCG) and oil & gas sectors led the decline in noon trade. The market made an attempt at recovery after touching a trough in the post-noon session but it ended marginally lower after inching above the neutral line.

Finally the Sensex settled down 12.52 points (0.06%) at 20,105, managing to retain the crucial level of 20,100. The barometer touched a high of 20,157 and a low of 19,982, intraday. The Nifty declined 6.15 points (0.10%) at 6,029, this too above the crucial 6,000 mark. The index touched a high of 6,050 and a low of 5,991, mid-session.

The overall market breadth was equated. The Sensex ended with 15 stocks on the advancing side and a similar number on the declining side. The Nifty had 26 gainers, 23 losers and one stock returned unchanged.

The top Sensex gainers were Mahindra & Mahindra (M&M) (up 2.54%), Reliance Infrastructure (R-Infra) (up 2.52%), DLF (up 2.37%), NTPC (up 2.31%) and Jindal Steel (up 1.33%). The laggards on the index were HDFC (down 1.96%), Reliance Industries (RIL) (down 1.12%) and Hindustan Unilever (HUL) (down 0.83%).

The sectoral gainers were BSE Power (up 1.15%), BSE Capital Goods (CG) (up 0.93%) and BSE Realty (up 0.48%). The notable losers in the sectoral space were BSE Oil & Gas (down 0.74%) and BSE IT (down 0.46%).

The Asian Development Bank (ADB) today raised India's growth forecast for the current fiscal to 8.5% from 8.2% but expressed concern over persistent high inflation and the rising value of the rupee, which could undermine future economic expansion.

The multilateral lending agency had projected a growth rate of 8.2% for 2010-11 in April. For the next financial year (2011-12), ADB has retained its earlier projection of 8.7%.

Markets in Asia ended lower as lingering concerns about the financial crisis in Europe kept investors on the sidelines. Speculation about the Chinese government initiating measures to rein in real estate prices also played on investors' minds.

The Shanghai Composite was down 0.63%, Hang Seng was down 1.03%, KLSE Composite was down 0.35%, Nikkei 225 was down 1.12%, Straits Times was down 0.52%, Seoul Composite was down 0.26% and Taiwan Weighted was down 0.03%. On the other hand, Jakarta Composite bucked the trend, ending 0.13% higher.

The US markets closed lower on Monday as concerns about a sustainable economic growth made investors jittery after the recent gains. While stocks gained following announcements of mergers and acquisitions, a dip in financial stocks led to the decline in the market after Moody's downgraded the debt of Anglo Irish Bank by three notches. The Dow was down 48.22 points (0.44%) at 10,812. The S&P 500 was down 6.51 points (0.57%) at 1,142. The Nasdaq was down 11.45 points (0.48%) at 2,369.

Hinting at a major overhaul in the regulations for insurance sector, the Insurance Regulatory and Development Agency (IRDA) today said it will soon come out with merger and acquisition (M&A) norms for insurers and initial public offer (IPO) guidelines are already on the way.

At the same time, IRDA also favoured portability in the health insurance space, a move that will pave the way for consumers to switch from one insurer to the other for their mediclaim policies.

Foreign institutional investors were net buyers of Rs1,137 crore in the equities segment on Monday. Domestic institutional investors were net sellers of Rs1,054 crore worth stocks on the same day.

Anil Dhirubhai Ambani Group (ADAG) group firm Reliance Power (R-Power) (up 1.68%) today said it aims to become the country's largest private sector power generating company by 2015.

The company will also have an operational capacity of 5,000 megawatts (MW) by 2012 and will commission another 20,000MW over the next three years, chairman of the Reliance Anil Dhirubhai Ambani Group Anil Ambani said at the company's annual general meeting (AGM) in Mumbai.

Pharma major Venus Remedies (up 4.19%) today said it has bagged a contract from Thailand for an anti-cancer drug, Docetaxel, under the government policy.

The company has received the contract from the Government Pharmaceutical Organisation (GPO) under the Ministry of Health, Thailand, for supplying Docetaxel for one year as per the Thai government's strategy of providing quality products at affordable prices, Venus Remedies said in a filing to the Bombay Stock Exchange (BSE).

Tata Steel (up 0.95%) would finalise plans to refinance $5.4 billion loans for its British unit Corus this week, a top company official today said.

Tata Steel vice-chairman B Muthuraman told reporters that "yes, the refinance plan for Corus is happening this week". He, however, declined to name the banks with which the company is negotiating.
The Indian multinational steel major had taken the loans to fund its $12.9 billion acquisition of Corus in 2007.




7 years ago

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