RBI curbs on Kapol Co-op bank extended till March 2018

Beena Parmar

Moneycontrol News

The RBI has extended curbs on the banking operations of Kapol Co-operative Bank in Maharashtra for a further period of six months till March 31, 2018.

According to the RBI directive, customers of the Mumbai-headquartered co-operative bank will allowed a maximum withdrawal limit of Rs 3,000 - irrespective of their total balance.

The latest directive, which is dated September 27, follows an earlier note issued by RBI on March 30, 2017.

“It is hereby notified for the information of the public that, the Reserve Bank of India…hereby directs that the Directive dated March 30, 2017 issued to the above bank, shall continue to apply to the bank for a further period of six months till March 31, 2018 vide Directive dated September 25, 2017 subject to review,” the central bank said in a statement.

The aforesaid extension and/or modification by the Reserve Bank of India should not per-se be construed to imply that Reserve Bank of India is satisfied of substantive improvement in the financial position of the bank, RBI added.

A copy of the directive dated September 25, 2017 notifying the above extension is displayed at the bank’s premises for the perusal of public.

In March, RBI had said, “The Kapol Co-operative Bank will, without prior approval in writing from the RBI, also not able to grant or renew any loans and advances, make any investment, incur any liability including borrowal of funds and acceptance of fresh deposits, disburse or agree to disburse any payment whether in discharge of its liabilities and obligations or otherwise, enter into any compromise or arrangement and sell, transfer or otherwise dispose any of its properties or assets except as notified in the RBI directions dated March 30, 2017.”

The directions had been issued in connection with the bank's poor financial health. It does not mean that the bank's licence has been cancelled but restrictions will continue till its financial position improves. The central bank may consider modifications of these directions depending upon circumstances, RBI had said.

In 2014, the RBI had banned premature withdrawal of fixed deposits from the bank and appointed an administrator to run Kapol Co-operative bank’s operations. The central bank had superseded the bank's board of directors owing to concern over its conduct.

The bank's then director Hiren Mehta allegedly aided three businessmen in siphoning off Rs 14.50 crore by submitting bogus letters of credit. He was arrested in December 2013.

The bank has 2.5 lakh customers, 77,308 shareholders and 338 employees.

Kapol Co-operative Bank was founded in 1939 by Late Khushaldas Kurji Parekh with "an objective to service the downtrodden and economically weaker sections of the society", the bank says on its website.

Its last annual report for 2012-13 showed a profit of Rs 1.85 crore at the end of March 2013, down from Rs 2.88 crore the previous year.