Madhavpura Mercantile Cooperative Bank
| Cooperative | |
| Industry | Banking |
| Fate | Licence cancelled by RBI on 1 June 2012 |
| Founded | Ahmedabad, Gujarat (10 October 1968) |
| Defunct | yes |
| Headquarters | Ahmedabad |
|
Area served
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Interstate |
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Key people
|
BKR Maruti(CEO) Ramesh Parikh (Chairman) Devendra Pandya (Managing Director) |
| – ₹1,147.13 crore (US$180 million) |
Madhavpura Mercantile Cooperative Bank (MMCB) was a Gujarat-based interstate cooperative bank that became defunct and lost its licence after it was unable to pay back the money it owed public depositors. Reserve Bank of India cancelled its licence in June 2012 under section 22 of the Banking regulations Act, 1949.
Madhavpura Mercantile Cooperative Bank was registered as a cooperative society in Gujarat on 27 September 1968. It began business within a fortnight, on 10 October, in Ahmedabad's Madhavpura spice-market area dealing with grocery traders. It received its banking licence 26 years later, on 19 August 1994, and became an interstate cooperative bank in April 1996. Three years later, in 1999, its status improved to that of a scheduled bank.
In 1999–2000, when the bank had 50,000 public depositors, it started lending out large sums of money to stock brokers in gross violation of Reserve Bank of India (RBI) rules and regulations. The MMCB had issued pay orders worth ₹1,200 crore (US$190 million) to stock broker Ketan Parekh, which he discounted at Bank of India. The bank had also lent money to Mukesh Babu and Sirish Maniar of the brokerage firm Maniar Group. At the time banks in India were not allowed to lend more than ₹15 crore (US$2.3 million) to stock brokers. In early 2001 Parekh and other brokers made a large sum of money when the 's Sensex saw a bull run; however, when the dotcom bubble burst, the Sensex dropped down to 3,000 points, and Parekh and the bank started having problems. On 8 March 2001, the news broke out that the bank had given a huge guarantee to Parekh which he lost in the stock crash. As little remained in the bank's coffers, public depositors began withdrawing their money; only a few were successful.
Prior to the scam, the Madhavpura Mercantile Cooperative Bank was the largest urban cooperative bank in Gujarat. It had a deposit base of ₹1,200 crore (US$190 million) in March 2001, half of which was from other banks. Seeing the condition of the bank and fear of losing their money among the depositors the RBI restricted the bank's operations on 13 March 2001. The Central Registrar of Cooperative Societies superseded the bank's board, whose 12 members were
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