The Reserve Bank of India (RBI) has placed restrictions on the Udhna Citizen Co operative Bank , for poor liquidity conditions. The restrictions on the co-operative bank have been placed in accordance with Section 35A of the Banking Regulation Act, 1949.
The bank was under the Reserve Bank of India (RBI) scanner and a special audit was carried out by the RBI in last August which revealed shocking violation of rules in disbursement of loans. RBI had issued notice to the bank in the past also for breaching the master circular and not following accepted codes.
According to sources, RBI had found massive irregularities in investment department of bank, where it has made investments through a broker, rather than doing it through government security dealer. Till March 31, 2009, total Non Performing Assets (NPA) of the bank accounted to 49 per cent, while 84.7 per cent CD ratio declared by bank was also wrong and misleading. Bank had given loans of more than 70 per cent of its total assets, which was again breach of RBI rules. Bank had credited 85 to 90 per cent of its total assets as loans according to Registrar, district co-operative department (Surat). The bank just recovered Rs 2.39 crore from 43 accounts that were given loans in the past.
Meanwhile thousands of account holders rushed to five branches of the bank on Tuesday night and wednesday morning to get their money back. However they were told that according to RBI rules, the would get only Rs. 1000 at maximum. The depositors said that sudden news of RBI action against the bank has ruined their Diwali celebrations. It should be mentioned that today was Dhan Teras.
Gujarat High Court today ordered stay on RBI action against Surat’s Udhna Citizen Cooperative Bank. This means, the bank would be able to work normally from tomorrow.