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Crisis-hit cooperative bank looks to raise Rs 300 crore in fresh capital

Sri Guru Raghavendra Sahakara Bank’s management proposes measures to RBI for a speedy turnaround

, ET Bureau|
Last Updated: Feb 11, 2020, 10.45 AM IST
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BENGALURU: The Sri Guru Raghavendra Sahakara Bank, the beleaguered cooperative bank in Bengaluru that is under the RBI’s watch, has sought the regulator’s approval to raise about Rs 300 crore in fresh capital to achieve a speedy turnaround.

The bank’s management has proposed a slew of measures to the RBI as part of a roadmap to shore up its finances, while offering to keep the fresh capital in separate suspense and escrow accounts until they are converted into shares. The bank is waiting for the regulator’s directions, sources privy to the developments told ET.

The bank with eight branches, founded in Basavanagudi in the city two decades ago, has not been carrying out regular banking transactions for the past one month.

The RBI has imposed a set of restrictions on the bank since January 10 after its inspection team found slippages in its loan book and increase in non-performing assets (NPAs). The restrictions include refraining from accepting fresh deposits, sanctioning or renewing new loans and making any investments without the regulator’s approval. Customers can withdraw only up to Rs 35,000 from their accounts. The restrictions will be in force for a period of six months or until further review.

The bank’s president K Ramakrishna declined to comment on the grounds that the communication between the bank and the RBI was confidential. An email query to the RBI remained unanswered as of press time. The management, sources said, is in talks with some large depositors requesting them to participate in its capital-raising efforts. If the RBI approves its plans, the bank will keep a part of their deposits in a separate suspense account, and pay interest until it is converted into shares, said sources.

The bank’s management is also approaching hundreds of other citizens requesting them to become shareholders by investing about Rs 1 crore each. It has told the RBI that these funds will be kept in an escrow account until they are converted into loans on the RBI’s approval. It is also pursuing plans to sell NPA accounts to willing financial institutions, along with the collateral, to overcome short-term capital issues. The bank is staring at non-performing assets of about Rs 375 crore from around 65 major borrowers, the amount it is now struggling to recoup.

The RBI, sources added, has permitted the bank to file police complaints against the defaulters. Apart from approaching the police, the bank will also invoke provisions of the law (Sarfaesi Act) to sell off the collateral pledged by the borrowers to recover the dues.

The bank has filed a police complaint against its past CEO M Vasudeva Maiya accusing him of sanctioning loans, in several cases without following due procedure.
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