Special: Abhyudaya Cooperative Bank will consider its legal options and may file an appeal against the RBI's ruling

 Special: Abhyudaya Cooperative Bank will consider its legal options and may file an appeal against the RBI's ruling

The Mumbai-based Abhyudaya Cooperative Bank's board was dissolved by the RBI on November 24 due to serious concerns about the bank's inadequate corporate governance standards, the regulator said in a statement.

According to RBI Chairman Sandeep Ghandat, the troubled Abhyudaya Co-operative Bank may file an appeal against the RBI's decision to dismiss the bank's board and is considering its legal alternatives, as he said in a November 27 exclusive interview with Moneycontrol. As.

We are thinking about going to court now that we have all of our legal alternatives at our disposal. There seems to be no other option since the RBI is unlikely to change its mind, according to Ghandat.

The Mumbai-based Abhyudaya Cooperative Bank's board was dissolved by the RBI on November 24 due to serious concerns about the bank's inadequate corporate governance standards, the regulator said in a statement.

Ghandat went on to say that the bank could ask the government to get involved in this situation.

On March 31, 2020, Abhyudaya Bank's website states that the bank has over 17.30 lakh depositors, with total deposits of Rs 10,838 crore and advances of Rs 6,654 crore as of March 31. Additionally, the bank's capital adequacy ratio was 12.60 percent on that day. After 2020, numbers are not in the public domain.

Ghandat said in the interview that the RBI would try to combine Abhyudaya Co-operative Bank with bigger banks or with smaller financing banks (SFBs).

Ghandat told Moneycontrol, "They (RBI) are working to give this bank to some big people. The investigation into our bank has been going on for the last two months."

According to Ghandat, the RBI has been requesting daily information on bank activities for the last two months for every branch.

This kind of due diligence often takes place when someone feels like taking over the bank. However, I've now come to the realization that the bank's assets are sound if they choose to transfer ownership of the institution to another party, buy out SFBs, or combine them with another bank," Ghandat said.

The RBI said that the move is effective for a full year. In order to oversee the bank's operations at this time, the RBI subsequently named Satya Prakash Pathak, a previous commander general manager of State Bank of India, as administrator.

The RBI has made it clear that the bank is not subject to any business limitations and is free to go on with its regular banking operations under the supervision of an administrator that the RBI appoints.

He said, "My father was the company's founder of this Abhyudaya Co-operative Bank; we built this bank absolutely full commitment."

Additionally, he said that a banking institution already has Rajendra Kumar, an extra director designated by the RBI and a DGM level executive for the last two years, on its board. Additionally, according to Ghandat, the RBI reviews performance on a monthly basis. The next meeting is set for November 29 in the suburbs of Mumbai.

Ghandat said that over the previous two years, the Mumbai-based bank was able to cut its bad loan portfolio from around Rs 1,550 crore to less than Rs 1,200 crore.

"In the previous four to five years, we have collected Rs 200 crore in addition to selling bad loans to asset rehabilitation businesses for Rs 1,000 crore. Additionally, our current GNPA is 20%, and our net NPA is between 11% and 12%. By 2022, he said, "we have improved operating leverage and cost of funds."

The RBI has been tougher on misbehaving cooperative banks in recent years. The Reserve Bank of India (RBI) disbanded the board of PMC Bank in September 2019 and imposed other regulatory measures after discovering some financial irregularities and the concealment and false reporting of loans made to HDIL, a real estate developer.

After conducting an inquiry, the RBI discovered that the bank was purportedly engaging in fraudulent activity for a number of years in order to support loans to HDIL by creating fictitious accounts and breaking rules on single-party lending. The RBI disbanded its board and prohibited deposit withdrawals when the scam was uncovered.

Afterwards, on January 1, 2022, PMC Bank combined with Unity Small Finance Bank.