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Not all is lost for cooperative bank depositors Monday, April 30, 2001

Ahmedabad: The depositors dreamt of big returns, the banker dreamt of fast money, and the broker just jumped into the fast lane. A crash was the foregone conclusion.

The crash of the Gujarat-headquartered Madhavpura Mercantile Cooperative Bank (MMCB) spells deep trouble for the country's cooperative banking industry. The Rs.10.3- billion scandal that its directors led the MMCB into threatens the very confidence of people in cooperative banks.

Cooperative banks generally offer returns on term deposits more than what nationalized banks offer. This is often their unique selling point for mobilizing resources. Depositors too don't mind taking small risks for that extra money.

Today the depositors with the MMCB are ruing their decision to place their faith and money with the bank whose chairman and managing director allegedly flouted every lending rule in the book to fund the sly operations of Bombay Stock Exchange broker Ketan Parekh.

Parekh sank, and with him the bank. The Reserve Bank of India (RBI) has taken some corrective steps like appointing an administrator with the brief to revive the bank. Administrator S. Ramchandran, in turn, has appointed two committees and two chartered accountants to help him do so.

The MMCB, as it turned out, extended more than Rs.10.3 billion to about a dozen and a half companies directly or indirectly controlled by Parekh even as the bank's dealing had been capped at Rs.2.99 billion.

Ketan Parekh, bank chairman Ramesh Parekh and chief executive officer Devendra Pandya have since been arrested and booked under various sections of the Indian Penal Code.

The proverbial silver lining in the cloud for the depositors is Ramchandran's statement before the Gujarat High Court that deposits to the tune of Rs.6.83 billion are insured with the Deposit Insurance and Credit Guarantee Corporation. So all is not lost for the depositors, it seems.

While the small investors can afford to nurse some hope of recovering their hard earned money, the quake-struck people of Kutch and Saurashtra are still struggling for a basic necessity of life-shelter.

First Chief Minister Keshubhai Patel announced that the state government would build 800,000 one-room houses in about two-and-a-half months so that the affected people would get shelter before the monsoon sets in late in June. He later retracted his words and said instead of building houses, the government would provide building material for the people to get their houses built.

The monsoon is due in less than two months and the "building material banks" are yet to be set up at all the affected places. What is going to happen once the monsoon sets in is anybody's guess.

In the interim, after keeping the people of the four major towns of Kutch - Bhuj, Anjar, Bhachau and Rapar - waiting, the government announced a rehabilitation package, which has the developer-builder lobby drooling at the prospect of making a killing.

The people of Anjar, who had marched nearly 300 km to get a satisfactory package, are enraged because the government has not kept its promise, made after they called off their march on the outskirts of Ahmedabad, some 30 km before state capital Gandhinagar. Now they have threatened to march all the way to the national capital to press for their demand for a better rehabilitation package.

Aware of the discontent among the people, the ruling Bharatiya Janata Party (BJP) even planned "kar seva" or voluntary work by its cadre to help the quake-affected people rebuild their houses. But the cadre has not shown much interest.

Though international agencies have praised the government efforts on the relief and rehabilitation front, the affected people are so disillusioned that the demand for a separate state of Kutch or granting it Union Territory status is gaining popularity.

 

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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