RBI had red-flagged Raghavendra Bank in October

Bengaluru-based Sri Guru Raghavendra Sahakara Bank (SGRSB) was cautioned by the Reserve Bank of India (RBI) a few months ago after the central bank found that the urban cooperative bank was evergreening loans.

The RBI asked the bank to immediately undertake a course correction. When the SGRSB didn’t heed the central bank’s order, the RBI cracked the whip last Friday, when it imposed curbs on the bank and capped withdrawals.

According to multiple sources in the know, the RBI had found the bank doing evergreening loans for the past many years in a bid to hide its bad loans. Evergreening is a ploy to mask loan default by giving new loans to help delinquent borrowers repay or pay interest on old loans.

“The RBI didn’t take action in an abrupt manner. The bank was given notice by the central bank five months ago. They didn’t course correct. So it was placed under the curbs,” two sources in the know told DH.

M V Maiyya, Chief Advisor of SGRSB, who admitted to evergreening of loans, said the RBI had verbally cautioned them three months ago when they started to inspect the bank’s books.

According to him, the RBI inspection started on October 14, 2019 and ended in December 2019. He further said the inspection report was handed to them on January 7 this year.

“During the inspection period, we have collected securities worth Rs 1,210 crore... We have the utmost respect for the RBI and will follow their instructions diligently,” Maiyya said.

But on Monday, in a bid to calm down agitated customers of the bank, the bank management blamed “some people” for being “not happy with the progress of the bank” which, according to them, led to the RBI cracking the whip on them.

The bank’s management has been avoiding the customers across its eight branches in Bengaluru. It was supposed to hold a press conference on Tuesday apprising the media over the issue, but cancelled it during the course of the day without providing any reasons.

Maiyya said the bank’s total non-performing assets, slippages of which happened since the beginning of this financial year, stood at Rs 372 crore from just 62 accounts, a whopping 32.4% of their total deposit base and more than seven times their share capital.

The bank has Rs 1,150.94 crore worth of advances, while 8,614 members at the end of March 31, 2018, pitching up a share capital worth Rs 52 crore. Interestingly, for 2018-19, the bank is yet to make public its audited figures.

On Friday last week, the RBI curbed any withdrawals in access of Rs 35,000 per account by the depositors, which created panic among the customers. The bank has about Rs 1,566 crore worth of deposits.
The central bank also barred the bank from granting any further advances to anyone.