In a significant move affecting the banking sector, the Reserve Bank of India (RBI) has taken the decision to supersede the Board of Directors of Mumbai-based Abhyudaya Cooperative Bank for a period of 12 months. This action, announced on November 24, 2023, was driven by “material concerns” related to poor governance standards observed in the bank. In response to these concerns, the RBI has appointed Satya Prakash Pathak, a former Chief General Manager of State Bank of India, as the “Administrator” to manage the bank’s affairs during this period.
The RBI’s intervention is noteworthy for its focus on improving governance and ensuring proper management of the bank. To assist the Administrator, a “Committee of Advisors” has been constituted, comprising Venkatesh Hegde (former General Manager, SBI), Mahendra Chhajed (Chartered Accountant), and Suhas Gokhale (former MD, COSMOS Co-operative Bank Limited). The RBI’s statement emphasizes that there will be no business restrictions placed on the bank, and it will continue its normal banking operations under the guidance of the Administrator. This is a reassuring message to stakeholders, including depositors, shareholders, and the public, ensuring that the bank’s branches and ATMs remain functional for regular banking activities.
Abhyudaya Cooperative Bank, which commenced its operations in 1964, was registered as a Multi-State Co-operative Bank by the Central Registrar in New Delhi on January 11, 2007. The bank operates predominantly in three states: Maharashtra, Gujarat, and Karnataka. As of March 31, 2020, the bank boasted more than 2.23 lakh members and over 17.3 lakh depositors. Its financial standing as of that date included deposits of approximately Rs 10,838 crore and advances amounting to Rs 6,654 crore. The bank has maintained a high ratio of CASA (Current Account Savings Account) deposits to total deposits at 37.55% and a robust Capital Adequacy Ratio of 12.6%. It operates a network of 109 branches, with 18 of these offering services seven days a week, in addition to 113 ATMs.
This move by the RBI is part of its broader mandate to oversee and regulate the banking sector in India, especially focusing on governance and financial stability. The appointment of experienced professionals to guide the bank during this transitional period is a clear indication of the RBI’s commitment to ensuring the smooth functioning and financial health of the banking sector. The fact that the bank’s operations will continue as usual is a positive sign for its customers and stakeholders, indicating that the RBI’s intervention is aimed at strengthening the bank rather than disrupting its services.