But with banking applications already rejected, RBI will need time to set the banks rolling
Maharashtra government has finally cleared a bailout package of Rs 319 crore for the Nagpur, Wardha and Buldhana District Central Cooperative Banks (DCCBs) in the state which were on the point of collapse due to poor recovery of loans, and in the case of Nagpur DCCB, a major scam.
While the amount will help the banks to raise their Capital Risk Weighed Assets Ratio (CRAR) to the requisite 4 per cent from the present unfavourable 7 per cent, it is not clear if the amount will be sufficient to meet liquidity norms also. While food and civil supplies minister Anil Deshmukh has said that the work of disbursal of loans to farmers, teachers’ salaries and acceptance of new deposits will begin now, banking sources say that it could be some time before depositors and credit cooperative societies whose funds are trapped with the banks can heave a sigh of relief.
The spanner in the works is the fact that the banking applications of all three banks have already been turned down by RBI, which makes the restoration of the same a more lengthy and complicated, said banking sector sources. Once the application is turned down, the RBI will have to draw up a fresh case for these banks, which might take time. Deshmukh, however, sounded certain that all formalities will be completed soon and the DCCBs will be in working condition soon.
Of the Rs 319 crore package relief, the Nagpur DCCB will receive Rs 93 crore, while Rs 102 crore and Rs 124 crore respectively will go to the Wardha and Buldhana DCCBs. This amount will help the three banks attain positive net-worth, yet another condition that was violated due to poor financial performance.
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