Nabard report indicts NCP-controlled cooperative bank

The National Bank for Agriculture and Rural Development (Nabard) has come out with a stinging, 169-page report, lambasting the board of the National Congress Party (NCP)- controlled Maharashtra State Cooperative Bank (MSCB), for gross mismanagement of the institution.

The report accuses the MSCB board of working against the interests of depositors, concealing non-performing assets, ignoring orders of the Reserve Bank of India, selling properties of defaulters below the reserve price, sanctioning loans without Nabard's approval and violating norms of the Cooperative Societies Act by waiving huge interest amounts.

MSCB's board was dissolved by the RBI on 5 May, and two state government bureaucrats were appointed its administrators. Nabard notes that MSCB, which operated without a license, also enhanced credit limits to some parties that had negative net worth.

The dissolution of the MSCB board and the tough action by the RBI has resulted in a rift between the two ruling front partners in Maharashtra, the Congress and the NCP. The MSCB, one of the largest cooperative banks in Asia, is also the apex credit body in the state's cooperative sector. It has for decades been dominated by union agriculture minister – and NCP chief – Sharad Pawar.

His nephew, Ajit Pawar, who is also the deputy chief minister of Maharashtra, was earlier chairman of the bank, and was a director before the board was dissolved. The NCP is accused of having misused the bank for political purposes, ensuring that it released funds only to sugar units and other cooperative sector outfits that backed the party during elections.

The cooperative sector in Maharashtra, dominated by corrupt institutions and politicians, has been destroyed over the years. Many banks have run up huge losses and politicians later pressurise the government to bail them out.