Looking to survive, CKP Co-op Bank to seek ₹240 crore from Maharashtra govt
- Of the bank's ₹158-crore outstanding loan book as on 31 March, ₹153 crore or 97% were non performing
- In May 2014, RBI had capped deposit withdrawals from the bank at ₹1,000
MUMBAI: In a last-ditch attempt at staying afloat, the CKP Co-operative Bank will approach the Maharashtra government seeking a capital infusion of ₹240 crore after the Reserve Bank of India (RBI) cancelled its licence, a senior bank official told Mint in a telephonic conversation.
“We are drafting a letter to be sent to the government, requesting it to put the liquidation on hold,” said Moreshwar Dhaimodkar, a general manager at the Mumbai-based co-operative bank.
The RBI on 2 May said it has cancelled the licence of CKP Co-operative Bank Ltd for reasons including, the lack of any viable revival plan and functioning “in a manner detrimental to the public interest and interest of the depositors”.
A look at the bank’s list of defaulters, available on its website, would make it clear that delinquent estate loans led to its downfall.
According to Dhaimodkar, of the ₹158-crore outstanding loan book as on 31 March, ₹153 crore or 97% were non performing. He added that ₹85-90 crore worth of the bad loans were in the real estate sector.
“The bank’s outstanding loan book was at ₹622 crore in 2012 and we have been able to recover over ₹500 crore since then,” said Dhaimodkar.
In May 2014, RBI had put curbs on bank under Section 35A of the Banking Regulation Act, capping deposit withdrawals at ₹1,000.
Following the RBI’s recent decision to cancel the licence, the bank now stares at liquidation and its depositors will get up to ₹5 lakh under the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act. The bank’s total deposits stood at ₹485.56 crore as on November 2019, according to information available on its website.
On Sunday, RBI spokesperson Yogesh Dayal tweeted that of the 1,32,170 depositors of the bank, about 99.2% will get full payment of their deposits from DICGC. This means that only 0.8% of its depositors had more than ₹5 lakh in their bank accounts.
“As there was no scope for revival of the bank, its licence has been cancelled,” tweeted Dayal. The DICGC limit was increased earlier this year to ₹5 lakh from ₹1 lakh after the collapse of the Punjab and Maharashtra Co-operative (PMC) Bank. The premium paid by banks was increased to 12 paise for every ₹100 of deposits.
Dhaimodkar told Mint that of the total depositors, 1,130 customers had deposits above ₹5 lakh amounting to ₹120 crore. “The rest of the bank’s depositors had up to ₹5 lakh in bank accounts, totalling ₹365 crore,” said Dhaimodkar. So, in terms of value of deposits, 24.7% of it is above the ₹5 lakh limit of DICGC.
In FY19, DICGC settled aggregate claims of ₹37 crore in 15 cooperative banks. There were no claims from commercial banks. “The claimed amount was primarily for banks in Uttar Pradesh, Odisha and Maharashtra," the corporation said in its 2018-19 annual report.
Trouble at the co-operative bank has been brewing for quite some time now. In November 2012, the central bank had imposed a penalty of ₹5 lakh on CKP Co-operative Bank for violation of its guidelines on a host of issues. These included extending finance to borrowers outside area of operations, exceeding exposure to housing and real estate, single party exposure limit, loans to directors, issuing bank guarantee to an entity not banking with them, non-filing of Suspicious Transaction Report (STR) report to Financial Intelligence Unit-India (FIU-IND), exceeding individual limit of unsecured advances, sanctioning overdraft against third party fixed deposits to one of its directors.
Once the RBI cancels the licence of a bank and recommends its liquidation, the Registrar of Co-operative Society (RCS), appoints a liquidator. The DICGC then issues guidelines for submission of claims by the liquidator within three months and requests RBI to appoint an external auditor for on-site verification of the list. Once the liquidator submits the claim list and the external auditors submit their report, claims are processed and a payment list is generated. The consolidated payment is released to the liquidator, who then releases the payment to the depositors.
The average period for settlement of claims by DICGC after receipt from the liquidators was reduced to 11 days during the year 2018-19 from 12 days during 2017-18.
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Business NewsIndustryBankingLooking to survive, CKP Co-op Bank to seek ₹240 crore from Maharashtra govt
First Published:4 May 2020, 09:08 AM IST
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