Maharashtra clears ‘conditional’ bail out package for beleaguered DCCBs

* The financial assistance of Rs 319.54 crore will be released only after court cases are settled in favour of Nagpur, Wardha, and Buldhana DCCBs and RBI has conveyed willingness to restore their banking licences

By Kartik Lokhande 
Decisions are of real help, if there are no conditions. Though Maharashtra Government has cleared a bail out package of Rs 319.54 crore for beleaguered District Central Co-operative Banks (DCCBs) in Nagpur, Wardha, and Buldhana, it is likely to be of little help immediately because of being ‘conditional’ in nature.
As decided in the cabinet meeting held recently the Co-operation, Marketing, and Textiles Department has issued a Government Resolution (GR) clearing bail out package for the three cash-strapped DCCBs in Vidarbha. As per the GR, the Government has sanctioned financial assistance of Rs 319.54 crore to enable these banks in maintaining Capital-to-Risk Weighted Assets Ratio (CRAR) of 4 per cent, which is essential for restoration of their banking licences. Under the package, an aid of Rs 92.94 crore has been offered to Nagpur DCCB, Rs 102.56 crore to Wardha DCCB, and Rs 124.04 crore to Buldhana DCCB.
However, the financial assistance will be released to the banks only if they fulfill certain conditions. The assistance will be released only after the petitions in the High Court are decided in favour of Nagpur, Wardha, and Buldhana DCCBs. Besides, the assistance will be available only if the Reserve Bank of India (RBI) conveys ‘formally’ its willingness to restore thheir banking licences.
It does not stop here. The bail-out package, if released, will come with some cost for the beleaguered banks. Even if the financial assistance is released, it will be treated as Government’s share-capital. These banks will have to refund the share-capital to the Government. How? The Government has spelt out that also. Nagpur DCCB will have to sell its building in Mahal, Buldhana and Wardha DCCBs will have to sell out their seven and five plots respectively, within a year. Commissioner (Co-operation) and Registrar of Co-operative Societies will monitor the progress in this regard. Further, these banks will have to deposit 50 per cent of the Non-Performing Assets (NPA) recovery with the Government. These banks will have to obtain the permission of the Government before recruitment of staff and salary increment to existing manpower.
It may be recalled here that Nagpur, Wardha, and Buldhana DCCBs were required to fulfill the conditions for obtaining banking licences by March 31, 2012 after they landed into trouble. As these could not meet the required conditions, the deadline was extended till September 30, 2012. The banks prepared their action plan and implemented the same. Still, these beleaguered banks could not fulfill the condition of 4 per cent CRAR. As a result, RBI turned doown the proposal of these banks for banking licences on May 9, 2014. All three DCCBs then filed petitions at Nagpur Division Bench of the Bombay High Court. After hearing the petitions, the High Court granted stay to RBI directions on May 30, 2014. 

19-06-14

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