Unable to withdraw their hard-earned savings, several depositors of the troubled Pune-based Shivajirao Bhosale Sahakari Bank (SBSB) are upset with the Reserve Bank of India and government authorities. They seek immediate justice.
As in the case of other failed banks, the Pune-based lender—once a prominent name in the region—too plunged into a crisis after its financials worsened and governance issues emerged.
On May 31, 2021, the RBI finally cancelled the licence of the bank, saying it does not have adequate capital and earning prospects and continuance of the bank is prejudicial to the interests of its depositors. But it didn’t happen all of a sudden.
The RBI first issued directions to the cooperative bank on May 3, 2019, freezing deposit withdrawals at Rs 1,000 per account. While more than 98 percent of the depositors got lucky with their deposits covered under the Deposit Insurance and Credit Guarantee Corporation (DICGC) scheme, the remaining 2 percent are left in the dark. They include senior citizens.
According to the DICGC, each depositor in a bank is insured up to a maximum of Rs 5 lakh.
What depositors say
Pravin Walvekar, a Pune-based senior citizen and SBSB depositor since 2002, recalled the plight of his fellow-depositors.
“When the initial moratorium of Rs 1,000 on deposit withdrawal was imposed in 2019, lower-income depositors including women from rural areas, senior citizens with retirement funds, and customers who kept their money meant for marriage with the cooperative bank literally cried,” said Walvekar.
Walvekar is now among over 8,000 depositors of SBSB seeking justice.
Rahul Agarwal, a 42-year-old corporate employee in Pune, is an affected depositor. His family had three separate accounts with the cooperative bank before it went bust, with over Rs 5 lakh in one account. His parents were solely dependent on the interest earned from those fixed deposits to survive financially, Agarwal said.
“My parents are senior citizens and were dependent on interest income… My parents did not have any money because they got only interest, so they fell for the high-yielding money and they deposited money with SBSB,” Agarwal told Moneycontrol. “We faced a lot of hardships; my grandma and father went through surgeries. We had to do demonstrations and what not to get our money. Finally, we received the guaranteed Rs 5 lakh amount but over Rs 2 lakh is still stuck.”
In the hope of recovering his money, Agarwal is running a Facebook group called “Shivajirao Bhosale Sahkari Bank - Depositors Forum,” which has over 400 members. The latest post on the page from June 17 included the snippet of a report that said the Directorate of Enforcement has been recording the statement of SBSB’s former chairman and now-jailed corporator Anil Bhosale in a money-laundering case registered against him and the bank.
As per reports, Bhosale allegedly misused his position and conspired with others to siphon Rs 71.8 crore from the bank. A member of the Nationalist Congress Party, the former chairman is presently lodged at Pune’s Yerwada jail.
Narayanan Subrahmanyam Punugu, a 61-year-old depositor at SBSB with over Rs 12.3 lakh in savings over the past 12 years, said he had suffered mental depression.
“When I was in service, I had mental depression for one year and finally started to understand the limitations of the cooperative bank. Three families had it the worst as the concerned depositor died due to age and due to heart ailments,” Punugu said.
Unhappy with authorities
Navinder Bedi, a 72-year-old with over Rs 5 lakh stuck with SBSB, says cooperative bank depositors are always made scapegoats for no fault of theirs.
“I had an account with the bank for the past three decades. I used to also invest in a bank-run daily investment scheme. I knew the chairman so well, but they were all black sheep,” Bedi said. “We are being paralysed. There is no hope of recovery after Rs 5 lakh. They give less than Rs 5 lakh for vote bank politics. More than Rs 5 lakh and no one is bothered, both government and insurance companies.”
Bedi, like other senior-citizen depositors, was motivated to invest his savings in the cooperative bank to get more interest on his deposit. His many visits to the RBI offices have not yielded any results, Bedi said.
“If you have invested your hard-earned money, you will slog to get it back… Fortunately, I received some small amount of money,” Bedi said.
Vivek Bhatia, a 62-year-old SBSB depositor, shared similar views.
“In a car accident, you receive full insurance claim. Why does the DICGC not ensure full insurance? Every year, all cooperative banks pay about Rs 30 lakh to Rs 40 lakh as premium to the DICGC, but for what?” Bhatia asked.
Bhatia is the breadwinner for his family and had over Rs 12 lakh in his account before the crisis hit in 2019.
“PMC Bank depositors got their money back as per the rescue scheme, they shook the government because they had the numbers. We do not,” he said.
Cooperative bank reforms
The lack of independence that the RBI still faces in regulating cooperative banks remains a crucial issue, experts said. India’s cooperative banks are regulated both by the RBI and state government entities.
A smaller operation base, lack of expertise, misgovernance at the board level, and deteriorating financials are some of the key challenges associated with the cooperative bank model, an RBI expert committee said in a 2021 report.
“The dual-control regime that characterised the regulatory legislation for UCBs meant that many aspects of a bank’s functioning, which impinged on the sustainable operations of the bank, were outside the purview of the RBI,” the expert committee said.
The committee noted that though there were suggestions for licensing of new cooperative banks to be immediately opened up, there already were over 1,500 UCBs in existence.
“The effort of the sector and RBI should be to instil and deepen public confidence in UCBs (urban cooperative banks) as efficient and dependable financial intermediaries by ensuring that the existing entities are working on a sound footing and the weak ones among them are either quickly nursed back to health or resolved in as non-disruptive manner as possible without further loss of time,” the RBI said.
According to Walvekar, the promoters of cooperative banks must not be able to influence board decisions nor have proximity to the management. There needs to be a clearly defined risk underwriting mechanism in play before sanctioning of big-ticket loans, he added.
“The RBI should also educate people that their deposit amount is secured only up to Rs 5 lakh,” Walvekar said.
(This is the fifth and final part of a Moneycontrol series on ‘India’s cooperative mess' that highlights the plight of retail depositors whose hard-earned savings are stuck at failed cooperative banks across the country. You can read the previous stories here, here, here and here)
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