Go Back   ManagementParadise.com | Management & Business Education Learning Platform Resolve Your Query - Get Help and discuss Projects > Management Of Co-operatives ( MOC )

Madhavpura Bank

Discuss Madhavpura Bank within the Management Of Co-operatives ( MOC ) forums, part of the Resolve Your Query - Get Help and discuss Projects category; Madhavpura Bank Madhavpura Mercantile Co-operative Bank was established on October 10, 1968 with the primary objective to cater to the ...

Reply

 

Thread Tools Display Modes
Madhavpura Bank
Old
 (1 (permalink))
Abhijeet S
abhishreshthaa is a splendid one to beholdabhishreshthaa is a splendid one to beholdabhishreshthaa is a splendid one to beholdabhishreshthaa is a splendid one to beholdabhishreshthaa is a splendid one to beholdabhishreshthaa is a splendid one to beholdabhishreshthaa is a splendid one to behold
 
abhishreshthaa
Operations Manager at Management Paradise
Management Paradise Guru
 
Status: Offline
Posts: 7,045
Join Date: May 2010
Madhavpura Bank - September 16th, 2010

Madhavpura Bank


Madhavpura Mercantile Co-operative Bank was established on October 10, 1968 with the primary objective to cater to the banking needs of wholesale grocery traders of Madhavpura area in Ahmedabad. Two years ago, the bank got the status of scheduled bank from Reserve Bank of India, which permitted the bank to expand its banking activities outside Gujarat.



Before RBI superceded the bank's board on March 15, Madhavpura Bank had 12 directors on its board including chairman Ramesh Parikh, CEO and managing director Devendra B Pandya, Ramanlal M Parikh, Natverlal V Desai, Manilal G Shah, Prabhudas Kothari, Natverlal Thakkar, Purshottamdas Shah, Pravinchandra Shah, Dinesh Majumdar, Sevantilal Shah and Pravinchandra Patel.


Madhavpura Bank before the scam


Madhavpura Bank was conducting normal banking activities with a deposit base of Rs 12 billion, of which Rs 6 billion was from other co-operative banks and organisations, while the rest is from the public. Depositors had put huge deposits after the bank had received scheduled bank status from RBI.


The trouble

RBI restricts co-operative banks from capital market activities. Scheduled co-operative banks are allowed to invest 10 per cent of their net worth in capital markets and allied activities. Madhavpura’s cash reserve ratio (CRR) and statutory liquidity ratio (SLR) were in line with RBI norms in the third quarter ended on December 31, 2000. It is believed that in the last two months, the bank has made extensive and imprudent advances.


Madhavpura Bank chairman Ramesh Parikh had accommodated big bull Ketan Parekh, with whom he had business dealings. It is believed that advances to the tune of Rs 2 billion have been given by Ramesh Parikh to Ketan Parekh. If this was not sufficient, there are other allegations. Ramesh Parikh's son Vinit Parikh runs a company called Madhur Capital and Finstock Limited, which deals in shares. Parikh is alleged to have paid off his son's dues at the stock market through Madhavpura Bank's fund.



The bank
On March 8, residents of Ahmedabad heard rumours of the bank having granted a bank guarantee of Rs 1.5 billion to Ketan Parekh. The advance made by the bank to Ketan Parekh is pegged at around Rs2bn. This resulted in panic among the depositors who started withdrawing deposits. The next day the bank faced a liquidity crisis and since then the bank has been in trouble.



RBI superceded the bank
Madhavpura Bank, which along with the "big bull" Ketan Parekh is in the eye of this pay-order scam, was declared a defaulter on March 12 by the Reserve Bank of India after a preliminary inquiry revealed that the Bank was facing a major liquidity crunch. Faced with acute liquidity crisis, Madhavpura Bank has been forced to pull down the shutters of its branches in Ahmedabad and Bombay. Preliminary inquiry conducted by RBI revealed that the bank's liquidity position was precarious after it issued pay-orders of Rs 650 million to the depositors. However, the bank was not in a position to honour pay-orders amounting to Rs 650 million, which was issued by the bank. This situation forced RBI to recommend Central Registrar of Co-operative Banks to supercede the board of the bank and appoint an Administrator.



Bank of India involvement

Bank of India is the worst hit in the pay-order scam from Madhavpura Mercantile Co-operative Bank. Madhavpura Bank had issued pay-orders worth Rs 1.2 billion to Ketan Parekh. In turn, Parekh had discounted these pay-orders, which bounced later. A pay-order is similar to a demand draft but is valid only in the same centre. The issuing bank is required to debit the account of the person who takes the pay-order. Thus the other bank, that receives the instrument, safely presumes that the money has already been recovered by the issuing bank and the instrument is secured. The difference in case of Madhavpura Bank was that the money was not debited, and Vinit Parikh's company Madhur Capital was instrumental in the issuance of large number of pay-orders, that were dishonoured.


The main culprits
Madhavpura Bank's chairman Ramesh Parikh, the bank's CEO Devendra Pandya, Madhur Capital and Ketan Parekh are the culprits.


Status of collateral securities

The RBI has carried out investigations but the final findings of the report have not been disclosed. It is believed that considering the business relationship of Ramesh Parikh and Ketan Parekh, not enough collateral had been sought



Beyond the cooperatives

the other banks

Several public sector banks have been hit very hard by the Madhavpura Bank's misdemeanor. The banks include such big names as the State Bank of India, Bank of India and the Punjab National Bank, all of which have lost hefty sum of money in the Madhavpura scam. Bank of India lost about Rs1.2bn as pay orders issued by Madhavpura Bank to Ketan Parekh bounced. This was because the bank was unable to honor its commitment.


Ketan Parekh reportedly used his seven Bank of India accounts to discount 248 payorders worth about Rs24bn in nine weeks between January 3 and March 9. These payorders were reportedly issued by the Mandvi branch of Madhavpura Bank, Fort branch of Standard Chartered Bank, UTI Bank and Global Trust Bank. Parekh had several accounts in all these branches. If one takes a look at all the aspects and dimensions of these scams with a deeper insight, it would at once reveal in no uncertain terms that it was in fact a “collaborative scam” and not a “pay-order scam”


There would have been no scam at all if these three public sector banks and the foreign bank concerned were prudent enough to tell their clients to route all their transactions only through their branches rather than taking the illogical and questionable route of obtaining pay orders from the co-operative banks.



As many as 168 co-operative banks, lured by kick-back offer from the chief executive of MMCB, parked deposits of nearly Rs 600 crore with MMCB. These co-operative banks were, therefore no less guilty of facilitating these scams. More than 50 per cent of the money (Rs 1,100 crore) that MMCB lent to Ketan Parekh, was provided by these 168 co-operative banks!




THE RBI Failure
The Reserve Bank of India (RBI) too failed miserably because it had neither the “time nor the man-power” to scrutinise the fortnightly statements submitted by co-operative banks. These statements are meant to reflect the liquidity position as well as the quality of management of liabilities and assets of each bank.

It is therefore, obvious that these vital statements are being obtained by RBI only as a “formality must” and not for critical scrutiny which, in fact, is its only purpose. This is indicative of gross failure of the monitoring mechanism of the central bank of the country.


Taking into consideration the enormity of the crisis, calls have increased for a greater role for the RBI as a regulator of the cooperative banking sector. At present, cooperative societies are under the dual control of the RBI and the Registrar of Cooperative Societies. Under this system, the RBI only has jurisdiction over the banking operations of the cooperative society while the registrar looks after the managerial and administrative functions.
Advertisements



Help Others > Network > Grow


Work with us part time/full time as forum moderator. Email us your resume on careers @ managementparadise.com PLS PRESS THANKS BUTTON IF U LIKED MY POST.


To view links or images in signatures your post count must be 0 or greater. You currently have 0 posts.
Friends: (0)
Reply With Quote
Re: Madhavpura Bank
Old
 (2 (permalink))
Jitendra Mazee
jiten005 is an unknown quantity at this point
 
jiten005
Management Paradise Guru
Status: Offline
Posts: 5,316
Join Date: Jan 2018
Re: Madhavpura Bank - January 19th, 2018

Quote:
Originally Posted by abhishreshthaa View Post
Madhavpura Bank


Madhavpura Mercantile Co-operative Bank was established on October 10, 1968 with the primary objective to cater to the banking needs of wholesale grocery traders of Madhavpura area in Ahmedabad. Two years ago, the bank got the status of scheduled bank from Reserve Bank of India, which permitted the bank to expand its banking activities outside Gujarat.



Before RBI superceded the bank's board on March 15, Madhavpura Bank had 12 directors on its board including chairman Ramesh Parikh, CEO and managing director Devendra B Pandya, Ramanlal M Parikh, Natverlal V Desai, Manilal G Shah, Prabhudas Kothari, Natverlal Thakkar, Purshottamdas Shah, Pravinchandra Shah, Dinesh Majumdar, Sevantilal Shah and Pravinchandra Patel.


Madhavpura Bank before the scam


Madhavpura Bank was conducting normal banking activities with a deposit base of Rs 12 billion, of which Rs 6 billion was from other co-operative banks and organisations, while the rest is from the public. Depositors had put huge deposits after the bank had received scheduled bank status from RBI.


The trouble

RBI restricts co-operative banks from capital market activities. Scheduled co-operative banks are allowed to invest 10 per cent of their net worth in capital markets and allied activities. Madhavpura’s cash reserve ratio (CRR) and statutory liquidity ratio (SLR) were in line with RBI norms in the third quarter ended on December 31, 2000. It is believed that in the last two months, the bank has made extensive and imprudent advances.


Madhavpura Bank chairman Ramesh Parikh had accommodated big bull Ketan Parekh, with whom he had business dealings. It is believed that advances to the tune of Rs 2 billion have been given by Ramesh Parikh to Ketan Parekh. If this was not sufficient, there are other allegations. Ramesh Parikh's son Vinit Parikh runs a company called Madhur Capital and Finstock Limited, which deals in shares. Parikh is alleged to have paid off his son's dues at the stock market through Madhavpura Bank's fund.



The bank
On March 8, residents of Ahmedabad heard rumours of the bank having granted a bank guarantee of Rs 1.5 billion to Ketan Parekh. The advance made by the bank to Ketan Parekh is pegged at around Rs2bn. This resulted in panic among the depositors who started withdrawing deposits. The next day the bank faced a liquidity crisis and since then the bank has been in trouble.



RBI superceded the bank
Madhavpura Bank, which along with the "big bull" Ketan Parekh is in the eye of this pay-order scam, was declared a defaulter on March 12 by the Reserve Bank of India after a preliminary inquiry revealed that the Bank was facing a major liquidity crunch. Faced with acute liquidity crisis, Madhavpura Bank has been forced to pull down the shutters of its branches in Ahmedabad and Bombay. Preliminary inquiry conducted by RBI revealed that the bank's liquidity position was precarious after it issued pay-orders of Rs 650 million to the depositors. However, the bank was not in a position to honour pay-orders amounting to Rs 650 million, which was issued by the bank. This situation forced RBI to recommend Central Registrar of Co-operative Banks to supercede the board of the bank and appoint an Administrator.



Bank of India involvement

Bank of India is the worst hit in the pay-order scam from Madhavpura Mercantile Co-operative Bank. Madhavpura Bank had issued pay-orders worth Rs 1.2 billion to Ketan Parekh. In turn, Parekh had discounted these pay-orders, which bounced later. A pay-order is similar to a demand draft but is valid only in the same centre. The issuing bank is required to debit the account of the person who takes the pay-order. Thus the other bank, that receives the instrument, safely presumes that the money has already been recovered by the issuing bank and the instrument is secured. The difference in case of Madhavpura Bank was that the money was not debited, and Vinit Parikh's company Madhur Capital was instrumental in the issuance of large number of pay-orders, that were dishonoured.


The main culprits
Madhavpura Bank's chairman Ramesh Parikh, the bank's CEO Devendra Pandya, Madhur Capital and Ketan Parekh are the culprits.


Status of collateral securities

The RBI has carried out investigations but the final findings of the report have not been disclosed. It is believed that considering the business relationship of Ramesh Parikh and Ketan Parekh, not enough collateral had been sought



Beyond the cooperatives

the other banks

Several public sector banks have been hit very hard by the Madhavpura Bank's misdemeanor. The banks include such big names as the State Bank of India, Bank of India and the Punjab National Bank, all of which have lost hefty sum of money in the Madhavpura scam. Bank of India lost about Rs1.2bn as pay orders issued by Madhavpura Bank to Ketan Parekh bounced. This was because the bank was unable to honor its commitment.


Ketan Parekh reportedly used his seven Bank of India accounts to discount 248 payorders worth about Rs24bn in nine weeks between January 3 and March 9. These payorders were reportedly issued by the Mandvi branch of Madhavpura Bank, Fort branch of Standard Chartered Bank, UTI Bank and Global Trust Bank. Parekh had several accounts in all these branches. If one takes a look at all the aspects and dimensions of these scams with a deeper insight, it would at once reveal in no uncertain terms that it was in fact a “collaborative scam” and not a “pay-order scam”


There would have been no scam at all if these three public sector banks and the foreign bank concerned were prudent enough to tell their clients to route all their transactions only through their branches rather than taking the illogical and questionable route of obtaining pay orders from the co-operative banks.



As many as 168 co-operative banks, lured by kick-back offer from the chief executive of MMCB, parked deposits of nearly Rs 600 crore with MMCB. These co-operative banks were, therefore no less guilty of facilitating these scams. More than 50 per cent of the money (Rs 1,100 crore) that MMCB lent to Ketan Parekh, was provided by these 168 co-operative banks!




THE RBI Failure
The Reserve Bank of India (RBI) too failed miserably because it had neither the “time nor the man-power” to scrutinise the fortnightly statements submitted by co-operative banks. These statements are meant to reflect the liquidity position as well as the quality of management of liabilities and assets of each bank.

It is therefore, obvious that these vital statements are being obtained by RBI only as a “formality must” and not for critical scrutiny which, in fact, is its only purpose. This is indicative of gross failure of the monitoring mechanism of the central bank of the country.


Taking into consideration the enormity of the crisis, calls have increased for a greater role for the RBI as a regulator of the cooperative banking sector. At present, cooperative societies are under the dual control of the RBI and the Registrar of Cooperative Societies. Under this system, the RBI only has jurisdiction over the banking operations of the cooperative society while the registrar looks after the managerial and administrative functions.
Hey friend, thanks for your contribution and providing the report on Madhavpura Bank which would really help many students and professionals. BTW, I am also going to share a document on Madhavpura Bank for helping others.
Attached Files
File Type: pdf Madhavpura Bank.pdf (135.7 KB, 0 views)
Friends: (0)
Reply With Quote
Reply

Bookmarks

Tags
bank, banks in india, co-operative bank, madhavpura, madhavpura bank, management-co-operative
Related to Madhavpura Bank
 

Similar Threads

Thread Thread Starter Forum Replies Last Post
Acquisition of GLOBAL TRUST BANK BY ORIENTAL BANK OF COMMERCE Abhijeet S Managerial Economics ( Eco ) 1 December 30th, 2017 03:53 PM
Top Bpo openings & Bank collection jobs at ICICI BANK, in Delhi, NCR Pooja Karan JOB OFFERS , Recruitments , Placements !! 0 March 13th, 2010 12:48 PM
Bank Jobs in Union Bank of India for 1040 Clerks kisho JOB OFFERS , Recruitments , Placements !! 0 September 27th, 2009 04:42 PM
Analysts' Picks - Gujarat Ambuja Cement, Federal Bank and Dena Bank Vijith Pujari Stock Markets Tips & Gyan !! 2 January 1st, 2009 11:03 PM
 


Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is On
Trackbacks are On
Pingbacks are On
Refbacks are Off


ManagementParadise.com is not responsible for the views and opinion of the posters. The posters and only posters shall be liable for any copyright infringement.



Search Engine Optimization by vBSEO ©2011, Crawlability, Inc.