South Indian Co-op Bank placed under directions

Mumbai: The Reserve Bank of India (RBI) yesterday placed the South Indian Co-operative Bank Ltd (SICB) "under directions" in public interest in view of its poor financial health.

As per directions issued under Section 35A of the Banking Regulation Act, 1949 (as applicable to co-operative societies) SICB as at the close of business on August 9, 2004 cannot, without prior approval in writing from the RBI, grant or renew any loans, make investment, incur liability including borrowal of funds and accepting fresh deposits, disburse or agree to disburse any payment whether in discharge of its liabilities and obligations or otherwise, enter into any compromise or arrangement and sell, transfer or otherwise dispose of any of its properties or assets.

However, withdrawal is allowed for the depositors up to a sum not exceeding Rs 1,000 of the total balance in every savings bank or current account or any other deposit account. Further, renewal of the existing term deposits on maturity in the same name and same capacity has been permitted. The RBI said that relaxation of the directive will be considered on review.

The 85-year old bank saw withdrawals of close to Rs 10 crore over the last two days. Its 30,000 odd depositors have parked about Rs 245 crore with the bank. Almost 85 per cent of the total deposits are in the form of fixed deposits. Total advances stood at Rs 137.64 crore as of March-end 2004.