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Ganesh Bank placed under moratorium

Special Correspondent

Depositors allowed to withdraw up to Rs. 5,000

MUMBAI: The Union Government has placed Ganesh Bank of Kurundwad Ltd, Kolhapur district, Maharashtra, under moratorium from close of business on Saturday on an application of the Reserve Bank of India (RBI).

"The Order of Moratorium has been passed by the Central Government in the public interest, in the interest of depositors and the banking system," the RBI stated in a press release.

"The moratorium will be effective from the close of business on January 7, 2006, up to and inclusive of April 6, 2006, or an earlier date if alternate arrangements are put in place. During this period, Reserve Bank of India will consider the various options, including amalgamation of Ganesh Bank of Kurundwad Ltd with any other bank and finalise the plans in public interest and with a view to protecting public deposits."

During the period of moratorium, the bank will be permitted to make only those payments that have been specified in the Order of Moratorium and the depositors of Ganesh Bank of Kurundwad Ltd will be permitted to withdraw the balances from their savings bank account or current account or any other deposit account through any of the branches of the bank subject to a ceiling of Rs. 5,000. The customers can withdraw funds up to the limit specified at any of the branches.

Family control

Established in 1920, Ganesh Bank of Kurundwad Ltd., has its headquarters at Kurundwad, Maharashtra. Members of one family are the major shareholders of the bank holding over 30 per cent of the total shares. The bank has a network of 32 branches and its operations are concentrated in Sangli and Kolhapur in Maharashatra and Belgaum in Karnataka.

As on March 31, 2005, the head office and 17 branches are computerised but have no inter-connectivity. As on March 31, 2005, the bank's deposits were at Rs. 217.43 crore and advances at Rs. 105.73 crore. Its gross non-performing assets (NPAs) were 8.04 per cent while net NPA were 8.32 per cent. The bank's net worth had turned negative to (-) Rs.3.05 crore, thereby making its Capital to Risk Adjusted Ratio (CRAR) negative at (-) 5.83 per cent as on March 31, 2005. The RBI added, "This resulted in erosion of depositors' money. The bank was also unable to come up with any credible plan to raise fresh capital."

In a similar action on July 24, 2004, the Government had issued an Order of Moratorium in respect of the Global Trust Bank Ltd (GTB) and specified that the depositors of the Bank will be permitted to withdraw up to Rs 10,000 from their savings bank account. Even though the central bank declared a deadline of October 24, 2004 for amalgamation of GTB with another bank, the RBI announced its intention to merge the troubled private sector, GTB with the public sector Oriental Bank of Commerce, within five days, on July 29, 2004.

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