RBI curbs push Baghat Urban Coop Bank into wage turmoil

Facing an acute financial crisis, the Baghat Urban Cooperative Bank finds itself unable to pay salaries for October to its 112 employees, as unrecovered lending has mounted to a staggering Rs 129 crore. The situation worsened after the Reserve Bank of India, citing instability, imposed stringent restrictions on the bank from October 6.

Withdrawals have been capped at Rs 10,000 per account for six months and the bank has been barred from issuing or renewing loans without prior permission. Fresh deposits too have been prohibited, tightening liquidity further.

Under pressure to slash operational costs, the Board of Directors introduced a salary reduction ranging from 5% to 35% across different employee categories. A bank official said the RBI had advised expenditure control and the wage cut became unavoidable after alternate measures, such as closing certain branches, were opposed by staff. Senior managers are expected to bear the maximum impact, as the deduction would apply to their basic pay rather than gross earnings.

Managing Director Rajkumar said the Board of Management failed to find favour with the employees demand of slashing this limit at its meeting held today following which salaries have been paid today. As against the usual pay bill of Rs 58 lakh, a sum of Rs 52 lakh was credited to the employees.

Recovery efforts have yielded little relief, with only Rs 2.58 crore collected since October 8. The bank’s non-performing assets remain alarmingly high at Rs 129 crore. Much of the distress stems from politically influential borrowers, who have allegedly pressured officials to delay the seizure of their mortgaged assets. Files under the SARFAESI Act, legislation empowering banks to recover dues without court intervention, were reportedly put on hold for months. Officials began taking action only after RBI restrictions came into force, widely viewed as a last-minute attempt to save themselves from regulatory heat.

Compounding the crisis, 28 mortgaged properties put up for auction failed to attract buyers during the first attempt, primarily due to inflated valuations. The next auction has been scheduled for December 12, though doubts persist as the notices were published in newspapers with minimal local circulation, raising questions on whether the process is merely procedural.

With mounting losses, weak recoveries and governance lapses, the bank’s financial future remains precarious and employees are left bearing the brunt of a long-ignored crisis.