HEALTHY SIGN: RBI official handing over the letter lifting restrictions imposed on Ongole Cooperative Urban Bank to its chairman Malempati Krishna Rao in Ongole on Tuesday. - Photo: Sreenivas Kommuri

ONGOLE: Reserve Bank of India has expressed satisfaction over recovery of the financial health of Ongole Cooperative Urban Bank and lifted the moratorium it had imposed on it two-and-a-half years ago with immediate effect.

The urban bank is the earliest to recover among the 18 cooperative banks that fell sick in Andhra Pradesh, thanks to the strenuous efforts of its employees in recovering bad debts and improving other parameters as per the RBI guidelines.

The bank can now pay depositors, accept new deposits, operate current and savings accounts, issue demand drafts etc, said beaming bank secretary Shaik Abdul Hameed.

The RBI officials visited the bank at closing hours on Tuesday and handed over letters lifting the restrictions they had imposed before.

Alarming scenario

The RBI had imposed restrictions on bank operations with effect from October 16, 2004, when the net non-performing assets (NPA) touched 20.28 per cent (as against permitted 10 per cent) and capital risk adequacy ratio (CRAR) sank to minus 28.86 per cent as against permitted nine per cent.

Alarmed over the financial health of the bank, the RBI imposed restrictions on its operations forbidding payment to depositors, freezing current and savings accounts till the situation improved.

The bank employees worked hard for recovery of loans and brought down outstanding loans from Rs.14.36 crores to Rs. 6.76 crores, making the NPA slide down to eight per cent and CRAR to 10 per cent.

Following this, the RBI lifted restrictions on the bank. The urban bank can now redeem its deposits amounting to Rs. 15.7 crores. "We will start repaying matured deposits from March 5, an auspicious day," said Mr. Hameed.

Austerity measures

As part of austerity measures, the bank reduced the number of employees from 72 to 37. After RBI restrictions came into force, it paid the remaining employees only 40 per cent of their salary. The bank had to increase its working capital and also profitability to pay full salary to the employees. "It may take two more years to do that," Mr Hameed said.

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