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Flight of capital from co-operative to nationalised banks Friday, March 23, 2001
AHMEDABAD:The image of co-operative banks in the city have taken a severe beating after two successive scams involving the Madhavpura Mercantile Co-operative Bank and Classic Co-operative Bank. Already both national and private banks in the city are recording a sharp rise in deposits and customer base, as a number of customers are switching to safer institutions.
Estimates say that almost half of the nearly Rs 500 crore withdrawn from the co-operative banks in the city over the last fortnight is finding way into other banks. "I am seeing a trend as more and more people are realising that their savings are safe with nationalised banks. Though it is difficult to give an exact estimate at the moment, I can safely say that this will run into several crores of rupees", said chief general manager of State Bank of India Madhav M Mehta.
"It took us four years to raise a deposit of Rs 32 crore and it took just a rumour of one day to finish off all the hard work which went into mobilisation of these deposits, says City Co-operative Bank's senior manager Naishad Mankad.
A spokesman for Bank of Baroda, Jayesh J Dholakia, agrees, "Some of the co-operative banks are run in a very professional way , but because of the panic caused by the follies of a couple of banks , all of them have suffered".
But both Madhavpura and Classic are just the latest in the ranks of co-operative banks which have been grounded in the past because of unprofessional approach and reckless handling of finance. If it was Madhavpura this time, six months back a market rumour thanks to the inept handling of finance by the General Co-operative Bank led to a major redemption spree in the city which had a cascading effect on a few other local banks. But chairman of the bank Hasmukh Shah says, "We are back in control and things are fine".
Similarly the take-over of the Ahmedabad Urban Co-operative Bank by Congress leader Surendra Rajput after dethroning founder members Champaklal Sanghvi and Manharlal Shah caused a major redemption spree a couple of years ago. Incidentally the Gujarat State Co-operative Bank, which is the apex bank, is managing the affairs of about 60 banks that have gone in red and many of them are sick and beyond repair, says Mankad. But, he added that the apex bank has never closed any of these banks.
In fact, "Barring three or four banks, the rest of the district banks (there are 19 in Gujarat) are all in the red and badly managed", says banking consultant M H Jowhar. It is also surprising that Madhavpura was handling deposits of over 150 banks, he adds.
Zonal manager of Bank of India P P Jain said, "Some co-operative banks still retain the goodwill that they have in the market and among the customers, but yes, there is a trend of people switching loyalties to nationalised banks". Jain said the bank had no idea of how much money had been transferred by customers to his bank from the co-operative sector but said "it could be anything between Rs 8 to Rs 10 crore".
A senior officer of the Indian Bank also confirmed that the deposits had increased by nearly Rs 8 crore in Ahmedabad in the last couple of weeks. President of state unit of All India Bank Officer Confederation Bihari Patel said, "People are realising that it is safer to keep their money in nationalised banks". He said most of the nationalised banks had benefited in the range of Rs 10 to Rs 20 crore as a result of the losing faith in co-operative banks.