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May 3, 2002 | 1010 IST
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UCBs withdraw deposits from Nagpur bank

K Ram Kumar

Some urban co-operative Banks in Nagpur have started prematurely withdrawing their term deposits with the Nagpur District Central Co-operative Bank.

The move follows the unravelling of dubious transactions in government securities done by the bank with a host of brokers.

At least four UCBs have reportedly withdrawn term deposits of around Rs 500 million from the beleaguered NDCCB. These banks had placed the funds as part of their statutory liquidity ratio commitment.

The Nagpur Nagarik Sahakari Bank Ltd has withdrawn term deposits of Rs 150 million from the NDCCB. Three other urban co-operative banks have also pulled out their terms deposits.

Around 50 UCBs in Nagpur have placed their deposits with NDCCB, though the quantum could not be ascertained.

According to sources in the know of developments, the board of Nagpur Nagarik decided to pull out their deposits on April 5 after "sensing something amiss" in NDCCB's dealings in the gilts market.

"UCBs are now feeling insecure about their funds parked with district central co-operative banks.

"Their (UCBs) confidence has been undermined by the unsavoury incident involving the Nagpur Bank. Now these banks have to park their funds with state-level apex banks to ensure their security," said a senior co-operative banker.

Co-operative bankers aver that the current developments do not augur well for the health of co-operative banks as the run on deposits could have a contagion effect across the three-tier co-operative system in the state.

"The co-operative banks, especially in the hinterland of the country, have no knowledge of how government securities are traded.

These banks, due to their ignorance of the working of the market, have become easy prey to avaricious brokers, who offer 'incentives' to the brass.

"The RBI should have given us a longer period of at least three years so that we are skilled enough to invest 25 per cent of our net demand and time liabilities entirely in government securities," said a senior co-operative banker.

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