RBI directive on Krushi Bank

By Our Staff Reporter

HYDERABAD, AUG. 14. The Reserve Bank of India (RBI) has stepped in and asked the Andhra Pradesh Registrar of Cooperative Societies to take over the management of the troubled Hyderabad based Krushi Cooperative Urban Bank.

The action comes in the wake of the bank facing a run on its deposits since Saturday last which effectively reduced the liquidity due to severe asset liability mismanagement, officials said. According to sources here, the RBI issued a three point directive to take over the management, to ensure that the board of directors have no say in the operations of the bank, and that the directors be barred from holding any position in cooperative bodies.

The Chairman of Krushi Bank, Mr. K. Venkateswara Rao is reportedly away in the U.S., while the ten directors are untraceable. Interestingly Mr. Venkateswara Rao received lot of publicity recently, when the Income Tax department honoured him for being the top tax payer (individual).After being approached by the depositors, the police have being trying in vain to trace the ten directors. Depositors have been asking for an assurance from the directors that deposits would be repaid.

On Monday depositors along with police went to the RBI here, where officials appealed to depositors to allow the bank to be opened. The RBI had also sought clarifications from the bank regarding its deposit base, and other transactions of the recent past. Consequently the bank, which was closed for two days, was opened on Tuesday, but no transactions took place.

Sources said that in the last month or so the bank managed to pay off depositors to the tune of Rs. 30 crores. However another Rs. 32 crores was pending. The bank took the position, according to sources, that it had sufficient funds in Government securities and it was in a position to pay off the rest of the depositors also, but required time to do so.

The run on the bank began recently with rumours that there was a mismatch of funds, and it was likely to default. Unconfirmed reports suggested that the bank's investments in stock markets had taken a beating. Speaking to The Hindu on condition of anonymity, some bankers coming under the umbrella of Greater Hyderabad Co-operative Urban Banks Forum, were critical of Krushi Bank's high profile publicity campaign and hoardings put up in Hyderabad. The publicity expenditure was much more than very well established cooperative banks in Hyderabad, they felt. They were also critical of the high interest rates offered on deposits, which was around 16.5 per cent till recently.

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