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May 7, 2002 | 1300 IST
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2 more co-op bank boards superseded

BS Banking Bureau

The Reserve Bank of India on Monday directed the Registrar of Co-operative Societies to supersede two more district co-operative banks, Wardha District Central Co-operative Bank and Osmanabad District Central Co-operative Bank, in Maharashtra.

In a parallel development, the RBI banned district co-operative banks from dealing in government securities in physical format.

Last week, the board of the Nagpur District Co-operative Bank was superseded for its involvement in the Rs 1.25 billion gilts scam. Sunil Kedar, chairman of the Nagpur District Co-operative Bank, has been remanded to custody as part of the investigations into government securities trading.

In two separate questionable deals, Wardha District Central Co-operative Bank and Osmanabad District Central Co-operative Bank received Rs 25 crore and Rs 50 crore, respectively, from the Nagpur District Co-operative Bank. A source said the three district co-operative banks were in the same loop and it is only natural that the boards of all three would be superseded.

Seven other district co-operative banks at Solapur, Nanded, Beed, Parbhani, Jalna, Jalgaon and Dhule are under the state government's close scrutiny.

Trading in demat form will help the central bank to keep a close tab on deals made by these banks as all deals will have to be reported through the subsidiary general ledger.

At present, 99 per cent of the deals in the bond market is in paperless form and only 1 per cent is in physical form.

The average trading volume in the government bond market was about Rs 40 billion till April end and now it has come down to Rs 20 billion.

District co-operative banks, high net worth individuals and provident funds, which do not have the SGL facility of an account with the central bank, have been dealing in government bonds in a physical format. No fraud is possible in the demat form of gilts transactions as it follows the delivery versus payment system.

The RBI and the National Bank for Agriculture and Rural Development, which supervises the district co-operative banks, have been investigating the gilts scam where a section of the co-operative banks was allegedly cheated by brokers. The Nagpur bank had reportedly given Rs 1.25 billion to brokers last year to buy bonds in physical form.

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Nagpur co-op bank board superseded
RBI steps in to stem gilts scam
The Rediff Budget Special
The Rediff-Business Standard Special

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