RBI supersedes Abhudaya Co-operative Bank Board

The Reserve Bank of India has superseded the board of directors of Mumbai head quartered Abhyudaya Co-Op Bank for lapses in governance standards and appointed SP Pathak, former State Bank of India executive to run the bank for 12 months.

But unlike in the case of PMC Bank, there are no restrictions on the bank and customers can transact normally.

“ The Reserve Bank has today superseded the Board of Directors of Abhyudaya Cooperative Bank Ltd., for a period of 12 months” said the banking regulator in a release on Friday. “The above action is necessitated due to certain material concerns emanating from poor governance standards observed in the bank. No business restrictions have been placed by RBI and the bank shall continue to carry on its normal banking activities as is hitherto, under the guidance of the Administrator” it said.

The Reserve Bank has appointed Satya Prakash Pathak, former Chief General Manager of State Bank of India as “Administrator” to manage the affairs of the bank during this period.

The banking reserve Bank has also appointed a “Committee of Advisors” to assist the Administrator in discharging his duties. The members of the “Committee of Advisors” are Venkatesh Hegde (former General Manager, SBI, Mahendra Chhajed a chartered accountant and Suhas Gokhale, former MD, COSMOS Co-operative Bank .

The bank has more than 2.23 lakh members and more than 17.30 lakh Depositors as of March 2020, with a total business mix of over Rs. 17,492 crore - deposits of Rs 10,838 crore and advances of Rs 6,654 crore.

The multi-state co-operative bank considered as a better managed urban co-operative bank during the past crisis in the cooperative banking sector has taken over smaller co-operative banks like Shree Krishna Sahakari Bank Ltd., Vadodara, Janatha Co-op. Bank Ltd., Udupi, Karnataka State and Manekchowk Co-op. Bank Ltd., Ahmedabad

“ The bank has been showing some financial stress for some time. One of the indicators is fall in profits” said a consultant to cooperative banks requesting anonymity. A long term analysis of financial data shows that profits started falling steeply from 2016 onwards. Net profits fell from a peak of Rs 98 crore in March 2014 to Rs 16.2 crore in March 2020, according to the figures posted on the bank’s website.

The 59 year old urban co-operative bank was by started social workers and labour movement activists in the textile mills dominated south central Mumbai.