Abhyudaya Cooperative Bank's Ousted Chairman Takes RBI To Court

Sandeep Ghandat, the erstwhile chairman of Abhyudaya Cooperative Bank Ltd., has dragged the Reserve Bank of India to court against an order issued last month.

The Bombay High Court is set to hear the matter on Jan. 4, 2024, Ghandat told NDTV Profit over a call.

"Not expecting the court to give us justice against RBI. The expectations are dim, but we are hopeful that they will reduce the punishment and not expel us. We have not made a blunder as big as expulsion," Ghandat said.

Through this case, he expects the court to keep the cooperative lender under the RBI's supervisory framework and allow it to continue business under restrictions, he said.

On Nov. 24, the RBI superseded the board of the cooperative lender and appointed an administrator. Moneycontrol reported the development first on Wednesday.

"The above action is necessitated due to certain material concerns emanating from poor governance standards observed in the bank. No business restrictions have been placed by the RBI and the bank shall continue to carry on its normal banking activities as is hitherto, under the guidance of the administrator," the RBI said in a statement on Nov. 24.

This is the first time since Uday Kotak's 2018 case against the regulator, that a banker has taken the RBI to court.

In a previous interview with NDTV Profit, Ghandat had said that Abhyudaya Cooperative Bank's net worth had turned negative Rs 173 crore in FY23. A year before that, the net worth stood at Rs 23.39 crore.

This fall in net worth came after the regulator required the bank to set aside additional provisions of Rs 193 crore on account of investments in security receipts held, Ghandat said. Security receipts are instruments issued by asset reconstruction companies as consideration for their purchase of distressed assets from financial institutions.

"If the security receipts provisions were not brought in suddenly, the bank was doing very well," Ghandat had said.

While its financial results after FY20 are not available in the public domain, Ghandat had said that its gross non-performing asset ratio as of March 31, 2023 stood at 20.93%. This is significantly above the system-level gross NPA ratio of 8.7% for urban cooperative banks, as mentioned in the RBI's Financial Stability Report released in June.

Abhyudaya Cooperative Bank was established in 1964 as a credit society to meet the requirements of Mumbai's cotton mill workers.