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C.R. Sukumar

As on February 28, the bank had extended advances of Rs 126 crore, while its deposit base stood at around Rs 141 crore. Over 98 per cent of the bank customers have insurance cover on their deposits.

HYDERABAD, March 7

IT was a virtual `Black Friday' for Vasavi Cooperative Bank. Plunged into a severe liquidity crisis, Vasavi, one of the three city-based, urban cooperative banks with scheduled bank status, found itself at the receiving end of depositors' ire.

The day began with thousands of depositors thronging several of the 17 branches of the bank in the twin cities of Hyderabad and Secunderabad, and one branch at Nandyal in Kurnool district.

The furious depositors attempted to ransack the properties of some of the bank directors, demanding them to clear the loans availed from the bank and enable early payment of depositors' money.

Overall, it was a tough task for the police to control the agitating depositors in the purview of 17 police stations in the twin cities.

All these events in a span of a few hours on Friday forced the Andhra Pradesh State Registrar of Cooperative Societies to intervene in the affairs of the over-20-year-old bank and take over the management.

A high-level management committee comprising of three senior Government officials - Mr Srinivas, Mr Aashirvadam and Mr Murthy - was constituted to handle the crisis at the bank.

The new Management Committee was expected to take charge on Friday evening and initiate immediate measures towards early recovery of loans, including those availed by the bank Directors, running into around Rs 30 crore.

While the bank Chairman, Mr Velloor Ravindranath Gupta, and two of the bank directors had put in their papers sometime during the end of last year, the Vice-Chairman, Mr Boggarapu Rajender, the Managing Director, Mr V. Rohini Kumar, and seven other Directors decided to step down on Thursday. Of the total 12 Directors elected for the board in March 2001 for a tenure of five years, there is only one Director, Mr R. Narasimha Rao, who is continuing to hold the post as on Friday.

According to Mr A. Satyanarayana, who took charge as the Acting Managing Director of the bank, "The new Management Committee appointed by the Government will take charge of the affairs of the bank from Friday. Meanwhile, the branch managers were advised not to make any premature or mature deposit payments until the new committee takes stock of the situation and issues appropriate instructions."

While admitting that the bank suffered a liquidity crisis owing to a run on it during the last week following adverse media reports, Mr Satyanarayana, however, attempted to assure that the money of the depositors was safe and secure with the bank. As on February 28, 2003, the bank had extended advances of Rs 126 crore, while its deposit base stood at around Rs 141 crore.

Apart from the lacklustre progress in recovery of loans and mobilisation of fresh deposits, the bank was also having a tough time due to run on bank resulting in large-scale premature withdrawal of deposits. Following additional provisions to the tune of Rs 20.19 crore during the last fiscal, the bank suffered a net loss of Rs 19.16 crore.

However, according to him, the bank was up-to-date in paying the premium for obtaining cover for the deposits with the Deposit Insurance and Credit Guarantee Corporation.

The latest payment of Rs 3.25 lakh paid on February 10 this year covers the period up to June. The deposits of up to Rs 1 lakh were covered under this insurance scheme, he said.

Of over 1.38 lakh depositors of the bank, as many as 1,37,735 depositors had deposits of below Rs 1 lakh, while there were only 238 customers with deposits ranging between Rs 1 lakh and Rs 1.5 lakh, and 98 customers with deposits between Rs 1.5 lakh and Rs 2 lakh. This indicates that over 98 per cent of the bank customers have the insurance cover on their deposits, Mr Satyanarayana said.

Stating that the bank had approached the Reserve Bank of India recently seeking temporary overdraft and some sort of relief package to bail out the bank from the current crisis, Mr Satyanarayana told Business Line that the bank now expects early recovery of loans and mitigate the liquidity crisis under the management of the Government appointed high-level committee.

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