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The Reserve Bank of India (RBI) has taken decisive action against Mumbai-based Abhyudaya Cooperative Bank, citing severe governance issues.
The RBI superseded the bank's board for a year and appointed Satya Prakash Pathak, a former State Bank of India executive, as the administrator to oversee operations. Despite the takeover, the bank can continue its regular activities without business restrictions.
RBI's intervention in Mumbai's Abhyudaya Cooperative Bank due to governance issues. Former SBI executive appointed as administrator. Details on actions taken, committee formation, and the bank's financial status.
Source: The New Indian Express
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This action was carried out under the Banking Regulation Act, specifically Section 36 AAA, which empowers the RBI to intervene in cases where a cooperative bank's operations could harm depositor interests or the public good. The regulator can supersede the board for up to five years in such instances.
Additionally, the RBI has formed a committee of advisors to support the administrator, including former SBI executive Venkatesh Hegde, chartered accountant Mahendra Chhajed, and former managing director of Cosmos Cooperative Bank Suhas Gokhale.
Source: ComplAdvantage
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Abhyudaya Cooperative Bank, with branches in several states, had faced rumors of license cancellation, which the RBI clarified as false recently. The bank, as of March 2021, reported deposits of ₹10,952 crore and loans of ₹6,711 crore.
This move aligns with the RBI's recent stringent actions against cooperative banks, particularly after the PMC Bank crisis. Amendments to the Banking Regulation Act granted the RBI more oversight over cooperative banks. In FY22, the regulator imposed enforcement actions worth ₹12.1 crore across 145 instances, a significant increase from ₹3.89 crore in 43 instances in the previous fiscal.
Comparatively, when the RBI imposed restrictions on PMC Bank in 2019, the bank had deposits worth ₹11,617.34 crore and loans of ₹8,383.33 crore. However, in PMC's case, the RBI had imposed comprehensive directions, restricting deposit withdrawals under specific sections of the Banking Regulation Act.
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