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Madhavpura bank to restart operations

The government has cleared a Rs 12.64-billion revival plan for the troubled Madhavpura Mercantile Cooperative Bank that will allow thousands of small depositors to withdraw funds, a senior government official said on Wednesday.

The bank was plunged into a payments crisis in March after its reserves dipped sharply due to over exposure to the country's shaky stock market.

The Reserve Bank of India has placed the Ahmedabad based Madhavpura under an administrator and frozen withdrawals of over Rs 1,000.

"A notification paving the way for revival of the bank with the help of the government and other cooperative banks has been issued. Depositors will be able to withdraw funds in about a fortnight from now," R M Joshi, Gujarat's Registrar of Cooperative Societies, said.

He said even after the move, depositors would be allowed to withdraw only up to Rs 100,000.

Under the recovery plan, state-run Deposit Insurance and Credit Guarantee Corporation will extend Rs 4.64 billion to repay depositors and over 160 co-operative banks from Gujarat would contribute eight billion rupees to enable the bank to re-start its operations.

Madhavpura had deposits of over Rs 12 billion from over 250,000 small investors and 164 co-operative banks when the crisis erupted.

The Central Bureau of Investigation is investigating allegations of fraud following a complaint by the state-run Bank of India.

Joshi said a new board of directors would be constituted in a week and a professional chief executive officer appointed to ensure the smooth functioning of the bank.

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