A banker with a difference

He cruised the bank to good times and is now steering it through bad times. K Rajkumar, general manager, Apex Urban Co-op Bank of Maharashtra & Goa Ltd, recalls his experience of being forced to wind-up a financially strong bank.

Interviewed by Shubha Madhukar.

K RajkumarThe Apex Urban Co-operative Bank of Maharashtra and Goa (AUBMG) was registered under the Multi State Co-operative Societies Act, 1984, by the Central Registrar Multi State Co-operative Societies. The bank was granted a licence under section 22 of the Banking Regulations Act, by the Reserve Bank of India on March 22, 1996. On October 30, 2004 the Supreme Court ruled that societies registered for undertaking banking business under this act cannot function as Co-op banks.

What was the reason behind the closure of the bank? Why did RBI cancel its banking licence?
There was no fraud, no misappropriation, no business losses. This is the first case since Independence when a valid licence granted to a banking entity has been cancelled for reasons other than these. It was purely on technical grounds that this licence has been cancelled. And that is rather unfortunate.

What was this technical ground?
Basically the Supreme Court found fault with our administration. It ruled that any co-operative society registered under the Multi State Co-operative Societies Act is not a banking company.

The bank was in profits. The profit was just above approximately Rs 20 crore three years ago, Rs 30 crore or more two years ago, and last year also we made a sufficient amount. A lot of money was in the form of government securities. Today, every paise of all the depositors has been returned and I am talking about Rs 687 crore. The depositors were paid, not by recalling the outstanding advances, but by selling the government securities and the profit on the original capital.