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August 14, 2001
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Secunderabad co-operative bank gives depositors a scare

Mohammed Shafeeq in Hyderabad

After giving its depositors a huge scare that necessitated intervention by the Reserve Bank of India and the police, a Secunderabad-based co-operative bank has agreed to resume functioning and clear the deposits.

Hundreds of agitated depositors thronged the main branch of Krushi Urban Co-operative Bank at Secunderabad, the twin city, on Monday evening to retrieve their money.

The bank started its regular business on Tuesday, but it was still not clear how many of the nearly 500 depositors would get back their money.

Bank's chairman K Venkateshwara and nine other directors are still missing.

But vice-chairman Venugopal said the chairman would soon present himself before the public, the police quoted him as saying.

Panic had gripped the depositors Sunday who gathered at the main branch of the bank to demand their money back. This had followed the bank's refusal last week to accept requests for withdrawals by a few of its depositors, who were told the bank had no money.

The RBI and police had to intervene Monday on behalf of the depositors, who have deposited Rs 350 million attracted by the 16.5 per cent interest it offered on their deposits. The RBI persuaded the bank manager to reopen the bank and accept the applications for withdrawals.

Bank manager P S Murthy then assured the depositors that their money would be returned as per the availability of funds and urged them not to panic.

Murthy said the liquidity problem had arisen as the bank had invested the depositors' money in government securities and bonds. The crisis had forced the bank manager to seek police protection.

The RBI has sought details on the bank's deposit position. An official of RBI said the licence of the bank had not been revoked. "We are still looking into the matter."

The RBI has assured the depositors that deposits up to Rs 100,000 were safe as they were insured with the Deposit Insurance Credit Guarantee Corporation of India. This, however, has worried those depositors who have invested more than Rs 100,000.

Interestingly, no depositor has come forward to lodge a formal complaint with the police. Perhaps, they do not want their money to get stuck in litigation.

Indo-Asian News Service

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