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RBI cancels Madhavpura bank’s licence

RBI cancels Madhavpura bank’s licence

Mumbai: The Reserve Bank of India (RBI) has canceled the licence of Gujarat-based Madhavpura Mercantile Co-operative Bank Ltd after the lender failed to revive its business battered by huge losses and mounting bad loans.

Madhavpura bank was in the news first in 1999-2000 when it allegedly resorted to indiscriminate lending particularly to stock broking firms violating norms. Later in 2001, the bank faced a run due to its alleged exposure to leading stock broker Ketan Parekh, who suffered huge losses in share trades.

On 5 June, Business Standard newspaper had reported that RBI had cancelled Madhapura bank’s licence, citing B.K.R. Maruti, chief executive officer of the bank.

The cooperative bank, which started operations in 1994, was holding Rs800 crore of inter-bank deposits from a large number of urban cooperative banks in Gujarat and from other banks, which posed a systemic risk for the state’s co-operative banks, RBI said.

Following the bank’s worsening business situation, RBI had restricted its operations in 2001 and asked the Central Registrar of Co-operative Societies (CRCS) to take it over. Following this, the CRCS superseded the lender’s board and appointed an administrator in March 2001.

As of 31 March, 2011, the co-operative bank had a negative net worth of Rs1,316.50 crore and gross non-performing assets of 99.99%. Its gross advances stood at around Rs1,126.59 crore while its accumulated losses stood at Rs1,357.41 crore, the release said.

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