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Krushi bank may go in for liquidation

C.R. Sukumar

HYDERABAD, Aug. 15

KRUSHI Co-Operative Urban Bank Ltd, the crisis-ridden Secunderabad-based bank, is likely to go in for liquidation since the other option suggested by the Reserve Bank of India -- merger with another urban co-operative bank -- is almost ruled out owing to the bank's large liabilities, according to RBI sources here.

The apex bank directed the Andhra Pradesh Registrar of Co-Operative Societies (RoCS) on Tuesday to supersede the board of Krushi bank, appoint an administrator and consider either liquidation or merger with another urban co-operative bank.

Sources in the RBI regional office here told Business Line that ``Krushi bank may go in for liquidation as it will be highly difficult to find takers for a bank with such alarming size of liabilities and serious mismatch of funds. We expect the Administr ator to be appointed by the RoCS at the earliest to supervise the bank's activities and settle the problems of small depositors.''

Sources said it was yet to be ascertained whether the bank had paid the entire premium to insure the deposits with the Deposit Insurance and Credit Guarantee Corporation (DICGC), a wholly-owned subsidiary of RBI, to cover deposits of up to Rs 1 lakh per individual.

According to RBI officials, the bank extended loans and advances of over Rs 53 crore as against the deposit base of Rs 35 crore as on June 30, 2001. The non-performing assets of the bank were estimated around Rs 33 crore, which amounts to over 60 per cen t of its total loans and advances.

The bank is learnt to have extended large amount of advances to four of its directors, including the Chairman and Vice-Chairman, without obtaining sufficient security against the loans. The bank was also having a significant exposure to the capital marke t of over Rs 2 crore.

Stating that the show-cause notice was being prepared to be served on the directors of the bank, the RoCS, Mr D. Srinivas, said an Administrator would be appointed in the next 24 hours to start examining the asset-liability mismatch.

Admitting that the RoCS did not possessing any significant detail on the financial health of the bank, Mr Srinivas said details have been sought from the RBI from the monthly returns filed by the Krushi management earlier.

``We were directed by RBI to take action against the directors of Krushi bank for extending loans to some of their board members without obtaining sufficient security against those loans. We will obtain continuous support from the RBI authorities for han dling the issue since we do not have expertise in banking activities,'' Mr Srinivas said.

Accusing the apex bank of being responsible for the current crisis at Krushi, a member of the Greater Hyderabad Co-Operative Urban Banks Forum said: ``RBI should not have given such a long rope to the promoters of Krushi bank, having sensed the trouble w ay back in June itself. The regulator, which was said to have found that the bank had extended substantial amount of loans to four of its directors without any security, should not have given time for the management to make good the securities. The crisi s could have been nipped in the bud itself.''

RBI was reported to have directed the bank in June itself to obtain security for all its unsecured loans before September and bring down the level of loans and advances to its directors to below 10 per cent of net advances. The apex bank was also reporte d to have given time for the bank till September to reduce its NPAs to below 10 per cent of net advances.