TUESDAY, APRIL 23, 2024
Alexandre Moniz Barbosa
Mapusa Urban Cooperative Bank is not any ordinary cooperative bank. In the decades since 1965 when it was started, the bank emerged as an institution which thousands of people turned to when in need of funds. Turned down by other banks, borrowers would find that this cooperative bank was willing to take the risk that others didn’t and loan them the money. To the thousands who found a safety net at Mapusa Urban Cooperative Bank, and to thousand others who banked with them trusting their hard-earned money in its vaults, the news last week that Reserve Bank of India had cancelled the banking licence granted to the cooperative bank would come as a rude shock, but not so much as an unpleasant surprise.
For those who were following the cooperative bank’s growth were aware that, the troubles of the past few years that had been plaguing it, were leading to some such harsh decision. Reserve Bank of India had already imposed withdrawal limits, an indication that the apex bank had found fault with the cooperative bank. As far back as 2014, RBI had even imposed curbs on financial transactions of the bank, and since then, the bank that had once been prancing around the State, had slowed down to a limping and straining trot.
Mapusa Urban Cooperative Bank has had a chequered history, with controversy dodging it constantly, but it somehow rode over most of these, occupying for a long while the pride of place in the cooperative banking sector, until it reached a stage when the troubles escalated and there was no turning back. For starters, it was the first urban cooperative bank to be established in North Goa, in December 1965, just four years after Liberation. This was a time when banking was still a closed sector with tight controls. Goa, at that point of time, was a very agrarian economy and this suited the bank’s promoters as well as its clients. It was meant for those who had small savings – the neighbourhood bank. And that is how it grew, having gained the confidence of the people – first of the residents of Mapusa, and then Bardez and then beyond the taluka.
It’s growth led to it being granted Scheduled Bank status by Reserve Bank of India in January 1998, and was even deemed as a Multi-State Co-operative Bank in January of the same year. It briefly remodeled itself as the Bank of Goa and opened branches across the State borders, but that perhaps was what shook the very moorings of the bank, and unable to stand the pressure of a larger network, fell back to being called Mapusa Urban Cooperative Bank, and limiting itself to Goa. Even in those days, when the name board outside the branch announced it as Bank of Goa, to the people it was Mapusa Urban Cooperative Bank.
Today, with 24 branches across the State, it cannot be easily written off. It has perhaps the largest network among cooperative banks in the State, but then as it floundered in its dealings, there came sanctions imposed by Reserve Bank of India, even limiting the amount that account holders could withdraw from the bank. That didn’t go well with the depositors and clients of the bank. To redeem its image and save itself, the bank, with the approval of the shareholders sought merger with another, and Punjab and Maharashtra Cooperative Bank was the chosen institution to shelter the troubled local entity. But just before the merger could become a done deal and be announced, PMC Bank itself ran into trouble and the amalgamation had to be hastily called off.
Up against a wall, so to say, Mapusa Urban Cooperative Bank looked at other options. An idea was floated of the government setting up a Corporation on the lines of the National Cooperative Development Corporation (NCDC) for the development of state cooperative banks in the State. The suggestion was that such a corporation could seek funds from NABARD, from the Government of India, from the State government, from NCDC or raise bonds, which could be utilised to stabilise the cooperative banks in Goa. There was also another option spoken of, which was to merge the local banks into one entity creating a single strong bank that would be financially stable and viable. The last made sense, given that the Centre has merged several nationalised banks to create stronger financial institutions. None of this did happen.
What happened instead was that the Reserve Bank of India withdrew the banking licence of Mapusa Urban Cooperative Bank, bringing to an abrupt end a bank, an institution and an idea. Mapusa Urban Cooperative Bank was an idea, because its early successes spawned the cooperative bank movement in Goa allowing it to grow to the position it stands at today. But, while the façade displayed that the bank was excelling, behind it there was a very different story. Just months ago, bank depositors tired of the restrictions had demanded a criminal investigation into the financial irregularities and mismanagement associated with the bank.
The depositors are small traders, housewives, low and middle-income working professionals who cannot afford to lose their savings that have been scrapped together by making sacrifices. It is they who are going to be the biggest losers in the fall of the bank. Who is going to be held responsible for the debacle of Mapusa Urban Cooperative Bank? The bank can’t have descended into the mess from which there was no way out, unless there was a good amount of mismanagement. Will there be an investigation into the alleged misdeeds of the administrators of the cooperative? The depositors and those who trusted the bank need to know what went wrong. A probe will also help other banks to determine what not to do. An investigation is surely called for in the case of the Mapusa Urban Cooperative Bank.
When a bank like Mapusa Urban Cooperative Bank crumbles, it shakes the entire cooperative banking sector. Most of Goa’s cooperative financial institutions are not in the best of health. The government and RBI should not wait to act until there is little that can be done to safeguard the bank or the depositors. Action has to be taken immediately; there are violations of the law. For that, all that is required is a monitoring system that assesses the banks on a regular basis, without any outside influence being brought about. Cooperative financial institutions have either been founded by politicians or have had the political class take charge of them at later dates. Herein lies the crux of the matter, as these become closed clubs, and the politicos, by virtue of the positions they hold, are able to avoid actions until there is no other option.
