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Madhavpura just the tip of the iceberg Sunday, April 8, 2001

GANDHINAGAR: Madhavpura may have kicked up quite a dust as it collapsed, being the second largest co-operative bank in the state, but financial markets of Gujarat are strewn with epitaphs of several such banks, many of whom went down without a whimper.

The number of banks going into liquidation has shot up drastically over the last two years and it seems that the Registrar of Co-operative Societies (RCS) and the Gujarat government have failed to evolve a mechanism to ensure fiscal discipline that could prevent banks from collapsing.

As against hardly any case of liquidation till 1998, over the last two years, as many as nine banks are in the process of being liquidated.

In 1999, liquidation proceedings were initiated against Ahmedabad's Suprabhat Co-operative Bank, Sarvodaya Co-operative Bank, Harshid Co-operative Bank and Sami Taluka Co-operative Bank.

Last year, liquidation proceedings began against Ahmedabad's Relief Mercantile Co-operative Bank and Veraval's Ratnakar Co-operative Bank.

This year, similar action was started against Ahmedabad's Bhagyalakshmi Co-operative Bank, Sahyog Co-operative Bank, and Veraval's Vibhagya Nagrik Co-operative Bank.

Sources in the co-operative sector say at least a dozen applications for liquidation of co-operative banks in Ahmedabad alone are lying with the RCS office.

One can add to this a list of 93 other banks against whom some kind of inquiry or the other is on for the last two years. In as many as 27 cases, police complaints, too, have been lodged by the RCS office.

But why things are not improving in the sector is anybody's guess. Sources say of the 18 district co-operative banks operating in the state, six were in the red by March 2001.

The RCS office is unable to act for safeguarding the interests of thousands of small investors because of the several political inroads made into the state's co-operative sector. It begins with the election of the board of directors fought on party lines.

It has often been seen that if the ruling party does not enjoy a majority in the board to elect the chairman of its choice, the government uses its nominees to achieve the goal. This is how hard-liner BJP legislator Amit Shah became chairman of Ahmedabad District Co-operative Bank last year.

The political appointees ensure haphazard disbursement of funds to trade and commerce lobbies they represent. Funds are even disbursed to religious and charity organisations for deriving political mileage, with no questions asked about the returns. Audit and inspection at regular interval by the RCS office overlook these facts.

Laments a senior auditor of the RCS office, "Even if we put adverse remarks regarding irregularities in our special audit reports directly submitted to the RCS for punitive action, virtually no action is taken thanks to political pressure from the board of directors."

And when irregularities are detected and responsibility fixed, RCS office receives phone calls pleading against 'harassment" of the director or the chairman found guilty.

Grossly understaffed - nearly 600 auditors on its rolls and as many on the panel for all the districts - and other experts, the RCS office says it has to handle as many as 55,000 different types of co-operative societies. It has no separate department for the banking sector (there are 379 co-operative banks in Gujarat).

 

This site is dedicated to our friend Younus M, who passed away on 28th Sept 00, and left on us an indelible memories ! - Team GujaratPlus.com

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