Concerns not addressed, RBI imposes curbs on Baghat bank

The Reserve Bank of India (RBI), in its orders issued on October 6, imposed several restrictions, including a Rs 10,000 cap on withdrawal per customer, on Baghat Urban Cooperative Bank located in Solan.

The RBI has been persistently expressing concern over the bank’s functioning but the lack of concrete efforts by its management to address the supervisory concerns and protect the interests of the depositors prompted the RBI to impose these restrictions.

As per the directions, the bank will be required to seek prior approval from the RBI in writing, for the grant or renewal of any loans and advances, incurring any liability, including borrowing of funds and acceptance of fresh deposits, among others measures.

The bank, however, has been allowed to set off loan against deposits keeping in view its current liquidity position, said RBI officials. “Eligible depositors will be entitled to receive a deposit insurance claim amount of their deposits up to a monetary ceiling of Rs 5 lakh only in the same capacity and in the same right, from the Deposit Insurance and Credit Guarantee Corporation,” they added.

As per the RBI orders, the bank will continue to undertake banking business subject to the restrictions till its financial position improves. Bank chairman Arun Sharma, however, assured all customers not to panic as they had Rs 450 crore liquidy. He termed the restrictions as temporary which would be lifted soon.

Managing Director Raj Kumar said that they had slightly fallen short of adhering to the monthly fiscal targets but since major auctions were slated to be held on October 15, they were hopeful of realising the requisite revenue that would help them wriggle out of the current situation.

A sum of Rs 322 crore was stuck as non-performing assets (NPA) in 2022. This amount had reduced to Rs 137 crore due to a slew of recovery measures initiated by the bank management. It, however, continues to have a poor NPA ratio of 47.10, which is far from satisfactory and hints at poor loan recovery.

As many as 499 people have availed of Rs 290 crore loans and around Rs 138 crore of it became NPAs. As many as 50 individuals have to repay Rs 72 crore. The bank has 10 branches and a network of about 80,000 customers in Solan district.

The bank’s working has remained in the thick of controversy earlier, too. The RBI had in April 2021 imposed a penalty of Rs 15 lakh on it for the violation of norms, including related to NPA classification.

Rs 138 crore NPAs

• As many as 499 people have availed of Rs 290 crore loans and around Rs 138 crore of it became NPAs
• As many as 50 individuals have to repay Rs 72 crore