A recent press report said that the bewildered Maharashtra State co-operative bank which has been suffering from huge bad debts amounting to Rs.400 crore has planned to sell its bad loans to asset reconstruction companies. It has planned to sell the loans, especially given sugar factories, on auction to asset reconstruction companies.
The country’s largest state bank was down with high net performing assets of 22 per cent of its gross assets which is Rs.2,700 crore. The company’s high level of nonperforming assets and inadequate capital had led to a negative net worth of Rs.144 crore by the end of March, 2011.
In May, the bank administration has been taken over by the State Government as per the order of the RBI. Mr. Prithviraj Chavan, the Chief Minister of Maharashtra has assured that the State government would render all its support to bring back the MSC bank to health. Besides, he said that the bank should strictly adhere to the RBI norms on income recognition, asset classification and capital adequacy to get a bank license.
A committee on Financial Sector Assignment recommended that no banks should be allowed to operate beyond 2010 without acquiring license.
The Managing Director of MSC Bank, Mr.P.R.Karnad has approached the RBI and the Finance Ministry for to permit one more year to comply with the norms.