Exclusive: Abhyudaya Cooperative Bank likely to appeal against RBI decision, seek legal options

Exclusive: Abhyudaya Cooperative Bank likely to appeal against RBI decision, seek legal options

The RBI, in a statement, announced on November 24 that it has taken over the Board of the Abhyudaya Cooperative Bank, headquartered in Mumbai. The intervention was prompted by significant concerns regarding inadequate corporate governance standards, as stated by the regulatory authority.

Sandeep Ghandat, Chairman of the bank

Crisis-ridden Abhyudaya Cooperative Bank may appeal against the decision of the Reserve Bank of India (RBI) decision to supersede the bank’s Board, and is evaluating legal options, said RBI Chairman Sandeep Ghandat in an exclusive interview with Moneycontrol on November 27.

“We are looking to go into the court with all legal options available to us. There is no other way for it; as it looks like RBI will not reverse its decision,” said Ghandat.

On November 24, the RBI superseded the Mumbai-based Abhyudaya Cooperative Bank’s Board citing material concerns related to poor corporate governance standards, the regulator said in a statement.

Ghandat further added that the bank might also approach the government, seeking intervention in the matter.

As per the website of Abhyudaya Bank, as of March 31, 2020, the bank has more than 17.30 lakh depositors, and total deposits of Rs 10,838 crore, and advances of Rs 6,654 crores. Also, the bank had a Capital Adequacy Ratio of 12.60 percent as of that date. Numbers post-2020 are not available in the public domain.

On November 24, the RBI took control of the Abhyudaya Cooperative Bank’s Board due to substantial concerns about inadequate corporate governance standards, according to a statement. Ghandat, expressing optimism, suggested that the bank’s assets are in a favorable position if there are plans to transfer ownership, merge with small finance banks (SFBs), or undergo other changes.

The RBI’s intervention is effective for 12 months, during which Satya Prakash Pathak, a former Chief General Manager of State Bank of India, has been appointed as the administrator to oversee the bank’s operations. The RBI clarified that there are no business restrictions imposed on the bank, allowing it to conduct normal banking activities under the guidance of the appointed administrator.

Ghandat, acknowledging his father as the bank’s founder, emphasized the commitment that went into establishing the Abhyudaya Cooperative Bank. He highlighted the presence of an RBI-appointed Additional Director, Rajendra Kumar, on the board for the past two years and mentioned regular performance reviews conducted by the RBI.

The Mumbai-based bank has reportedly reduced its bad loans from Rs 1,550 crore to below Rs 1,200 crore over the last two years. Ghandat detailed efforts to address bad loans by selling Rs 1,000 crore to asset reconstruction companies and receiving Rs 200 crore in the last 4-5 years. He also noted improvements in the cost of funds and operating profit from 2022.

The context of regulatory actions on cooperative banks was highlighted, citing the RBI’s intervention with PMC Bank in September 2019. The RBI had superseded PMC Bank’s board, imposing restrictions after detecting financial irregularities related to loans given to real estate developer HDIL. Subsequently, PMC Bank was amalgamated into Unity Small Finance Bank in January 2022.

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