Material concerns: RBI supersedes Board of Abhyudaya Cooperative Bank, appoints administrator

The RBI action is valid for a period of 12 months, the central bank said.

The Reserve Bank of India (RBI) on November 24 superseded the Board of Mumbai-based Abhyudaya Cooperative Bank citing material concerns related to poor corporate governance standards, the regulator said in a statement on November 24.

The RBI action is valid for a period of 12 months, the central bank said.

Subsequently, the RBI 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 RBI has clarified that no business restrictions have been placed on the bank and the bank can continue to carry on its normal banking activities under the guidance of the RBI-appointed administrator.

Also, the RBI appointed a committee of advisors to assist the administrator in discharging his duties, the central bank added. The members of the committee are Venkatesh Hegde, former general manager, SBI, Mahendra Chhajed who is a  chartered accountant and Suhas Gokhale who is former MD of COSMOS Co-operative Bank Limited.

"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," the RBI statement said.

As per the website of Abhydaya Bank, as on 31 March 2020, the bank has more than 17.30 lakh depositors and total deposits of Rs10,838 crores and advances of Rs 6,654 crores. Also, the bank had Capital Adequacy Ratio of 12.60 per cent as on that date. Numbers post 2020 are not available in public domain.

In recent years, the RBI has been cracking down on erring cooperative banks. In September 2019, the RBI had superseded the board of PMC Bank and placed it under various regulatory restrictions after detection of certain financial irregularities, hiding and misreporting of loans given to real estate developer HDIL.

During investigations, it was found that the bank had been allegedly running fraudulent transactions for several years to facilitate lending to HDIL through fictitious accounts and violating single-party lending rules. The RBI imposed restrictions on deposit withdrawals and superseded its board after the fraud was detected.

Later, PMC bank was amalgamatged to Unity Small Finance Bank which came into effect from January, 2022.

That apart, the central bank has acted on several other cooperative banks. The RBI has cancelled the licence of at least eight cooperative banks and imposed monetary penalties on several banks in the financial year 2023 alone.

The banks that went defunct this year included Mudhol Cooperative Bank, Millath Cooperative Bank, Shri Anand Cooperative Bank, Rupee Cooperative Bank, Deccan Urban Cooperative Bank, Laxmi Cooperative Bank, Seva Vikas Cooperative Bank and Babaji Date Mahila Urban Bank.

According to Abhydaya Bank website, the bank was conferred with scheduled bank status by the RBI in September 1988.  The cooperative bank has branches in Maharashtra, Gujarat and Karnataka.