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May 9, 2002 | 0850 IST
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State may ban gilt deals with brokers

Renni Abraham

The Maharashtra government is considering issuing a directive to the 660-odd urban cooperative banks as well as the district central co-operative banks banning them from investing in securities through brokers.

A senior state government official told Business Standard: "We are seriously contemplating such a ban. It might seem like a pre-emption but the co-operative banks are themselves considering imposing such a self-regulatory policy upon themselves. We are monitoring the situation before officially issuing the ban."

With regard to the Maharashtra State Co-operative Bank, the state co-operative department has already received an interim reply on the bank's securities transactions, he said.

"We had sought details of the MSCB's securities transactions, in the wake of dubious transactions in government securities undertaken by the Nagpur, Osmanabad and Wardha DCCBs and Junglee Maharaj Urban Development Cooperative Bank through brokers coming to light.

In their interim reply submitted to the state government last week, MSCB has stated that the bank has not indulged in any such transactions. The final report is awaited."

The official also stated that the exposure of the cooperative banks in the government securities is not expected to be more than Rs 24 billion, unlike what has been printed in a section of the media.

"For DCC banks, an upper limit of Rs 50 million has been fixed by the RBI for government securities investments through the SGL account. For urban cooperative banks, this limit is still lower, averaging around Rs 30 million," he said.

"NDCCB's limit for such transactions was set at Rs 50 million, while the Satguru Junglee Maharaj Urban Development Bank had an upper limit of Rs 10 million only. On this basis, we do not expect the total exposure of cooperative banks in the state to cross Rs 24 billion at the upper limit, even if in some instances (such as the NDCCB where Rs 1.20 billion over the Rs 50 million limit was indulged in) this upper limit was substantially breached," he said.

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