The Reserve Bank of India ( RBI) on Friday superseded the board of Abhyudaya Co-operative Bank for one year over poor governance standards and appointed Satya Prakash Pathak, ex-chief general manager of the State Bank of India, as its administrator during a one-year period. He will be assisted by a committee of advisors. Significantly, no business restriction has been placed on the bank and it can continue do its normal banking activities under the supervision of Pathak.
The RBI explained that the "the action was necessitated due to certain material concerns emanating from poor governance standards observed in the bank."
The committee members
The committee members include Venkatesh Hegde, ex-GM of SBI, Mahendra Chhajed, chartered accountant, General Manager, SBI, and Suhas Gokhale former MD, COSMOS Bank.
In 1964, the Abyudhaya Co-operative Credit Society was formed essentially to cater to the financial needs of mill workers and lower middle class citizens. Later it was converted to a full-fledged cooperative bank headquarterd in Kalachowkie, in central Mumbai. According to the Bank's website, which has not been updated, it has 2.23 lakh members and 17.30 lakh depositors as on March 31, 2020. It has deposits of Rs 10,838 Cr and advances of Rs 6,654 cr.
"The bank has maintained a ratio of CASA (Current Account Savings Account) deposits to total deposits as high as 37.55%. The Capital Adequacy Ratio maintained by our bank is as high as 12.6%," as per the bank's website.
RBI's previous restrictions
In 2019, the RBI had imposed restrictions on Punjab and Maharashtra Co-operative Bank Limited (PMC Bank) following the discovery of a huge fraud in the institution. Several of its directors were also arrested by the Economic Offences Wing (EOW) of the Mumbai crime branch.
The action has been taken by the RBI in the background of fears that its licence may be revoked. Though in October, the RBI had denied that there was any such move, the fears persisted. The Bank occupies a central position among voters of central Mumbai and the BJP was understandably concerned about the political fall out of any major problem in the institution. Hence, the BJP government at the Centre stepped in quickly before the situation went out of control. Even though the RBI has assured that the Bank's normal banking operations will continue, reportedly there is considerable apprehension in the minds of depositors. It will take considerable efforts to allay their fears.
