Ministry of Finance on April 26, 2002, asked the RBI to inquire into allegations of fund irregularities after receiving a number of complaints from the Cooperative Bank Employees Union and small depositors of the bank.
In its 28-page inspection report noted that the bank had been declared “weak” since 1995 and after the 2002 inspection was being classified as “sick.”
The report revealed:
- The real or exchangeable value of the bank’s paid-up share capital and reserves stands at minus Rs 197.67 lakh. Thus, the bank is not having adequate assets to meet its liabilities. The bank does not comply with the RBI’s requirement of minimum share capital.
- The ratio of the net erosion to net owned funds of the bank is as high as 312.4% and the erosion in the value of the bank’s assets has not only wiped out its owned funds but has also affected the deposits to the extent of Rs 197.67 lakh, forming 26% of total deposits.
- The gross non-performing assets of the bank amount to 65.8% of the total loans and advances.
- The Board has not made any concerted effort to improve the bank’s financial position and bring it out of the weak status.
The RBI further stated in the report: “Pratibha Patil is the founder member of the bank, who is a politically influential personality. She has made all her relatives as directors of the bank and the bank is being run as good as a family business. Because of the influence of respondent no 8 (Prathiba Patil) the bank has given various loans to the relatives and to a sugar factory of which she is a director.”
“Her relatives have not paid back the loans. Most of the loans were given without security. Most of the loans are closed”
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