Yesterday, Moneylife had reported that MSCB, the nodal bank for all co-operative banks in the state, is in deep financial trouble due to its suspicious loan distribution to some of its favoured co-operative banks and some loss-making sugar co-operative factories.
Nagesh N Kini, chartered accountant and secretary of Mahim Co-operative Housing Society, told Moneylife, "We have moved our money from the bank, because if something happens to this bank, at the most, you'll get Rs 1 lakh deposit insurance cover and that too doesn't come easily. It's advisable for people to move the money from there to stronger co-operative banks or public sector banks."
The apex co-operative bank has been found to have misreported facts and has been given a 'D' grade for the financial year 2009-10 by its auditors, Joshi Nair and Associates. The bank has shown deposits of Rs21,500 crore and a net profit of Rs2.83 crore. However, according to the audit report, the bank has suffered a loss of Rs1,070 crore, mainly due to non-performing assets (NPA). As per the provisional figures for FY10 provided on the bank's website, NPAs are 20.9%. While converting the same into net NPAs, the bank has shown the figure at 7.7%. A majority of the directors of MSCB belong to Sharad Pawar's Nationalist Congress Party and many of the others belong to some of the other mainstream parties.
Vinod Sampat, advocate and founder, Vinod C Sampat and Co, said that the profit claimed by MSCB was nothing but "window dressing." He said, "Co-operative banks are not following proper laws and it is not run on a professional basis. There is lack of accountability and they are surviving because of monopoly and patronage of the co-operative department. No one likes to invest in a co-operative bank, but they are forced to do so under the statutory rules. There is a lot of political interference also. It is full of double-standards."
Mr Pai pointed out that the sugarcane industry should be modernised. "If the bank survives, then also the industry survives. Otherwise, what will happen is that if the bank goes into trouble, small depositors will lose their money. So let there be no political revenge and let us have the best possible solution," he said.