Financial Daily from THE HINDU group of publications
Sunday, Mar 10, 2002
Money & Banking - Co-operatives
Run on AP co-op bank
Depositors of the Prudential Co-operative Urban Bank trying to get their money back on Saturday.
HYDERABAD, March 9
THOUSANDS of depositors of Prudential Bank, the Hyderabad-based co-operative bank, thronged all the 20 branches of the bank 19 in the city and one in Cuddapah on Saturday seeking premature withdrawal of their deposits.
Following adverse reports that appeared in the local media on the soundness of the bank, the depositors lined up before branches of the bank much before the beginning of working hours. As a result, the Prudential management had a tough time in its attempts to convince the depositors on the financial health.
According to the reports in the media, the Registrar of Co-operative Societies (RCS) ordered a statutory inquiry into the bank's accounts, suspecting financial irregularities and violation of the Andhra Pradesh Mutually Aided Co-operative Societies (APMACS) Act.
Reports suggested that a senior official of RCS was directed to look into around a dozen charges on the 82-year-old bank with a current business size of a little over Rs 1,000-crore, which include deposits of around Rs 560 crore and advances of Rs 450 crore.
The alleged irregularities pointed out by the RCS include unsatisfactory recovery of loans, `evergreening' of certain non-performing assets by enhancing their limits and huge variation between the budgeted figures and the actual spending.
The bank had to pay a little over Rs 10 crore of deposits on Saturday alone. Police forces were also deployed at many of the branches to prevent law and order problems.
Just before the closure of the day's operations on Saturday, the bank management was successful in obtaining a letter from the RCS, Mr D.R. Garg, stating that the reports in the local media "appears to be highly exaggerated.''
The Prudential Bank management now hopes to succeed in its steps to convince the depositors on its financial health based on the letter obtained from the RCS.
When contacted, the Managing Director, Mr B. Pullaiah, said the bank never resorted to evergreening of advances and there were no financial irregularities and violation of any of the provisions of the APMACS Act. On the alleged variation between the budgeted figures and the actual spending, Mr Pullaiah said expenses were very much in tune with the increase in business volumes.
As against the total budgeted income of Rs 59.7 crore for the fiscal year 2000-01, the bank earned an income of Rs 110.27 crore, which is Rs 60.57 crore more than the budgeted figure.
Similarly, the bank incurred an expenditure of Rs 86.25 crore during the year against the budgeted expenditure of Rs 58.14 crore.
According to Mr Pullaiah, the excess expenditure of Rs 28.76 crore includes an amount of Rs 26.51 crore paid as interest on the deposits and depreciation of Rs 0.60 crore.
The balance excess expenditure was only Rs 1.65 crore and was negligible for the size of the bank's business operations. Stating that the budgets exceeded under various heads owing to the increase in the business volumes, Mr Pullaiah said all these amounts were ratified by the members at the general body held during September last year.
"All our advances are fully secured and backed by 200 per cent collateral security of urban house properties.
All our advances are 100 per cent recoverable and our depositors need not be worried about their investments in the bank,'' Mr Pullaiah said.
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