Over the past few years about 1000 co-operative banks have failed.

Over the  past a few thousand chit fund companies have failed

A few Nbfc have failed. May be say 1000?

Plantation schemes, brokerage houses………the list is far too long.

depositors are lucky that ILFS did not accept public deposit..

NSEL money lost…Rs. 12000 crores……..

One thing common to all. The equity holder gets nothing in such cases and the depositor also gets nothing – if you adjust for inflation…

Well when a bank fails what happens?

Well the Smart, agile, brilliant RBI puts one baboo(n) as an administrator…and he is like a funeral director. He makes sure that the corpse does not suddenly get up. He gets a nice salary from the depositors money (jal rahi hai kya?). The employees are paid a salary, appraisals happen regularly, landlords of branches, atm, etc are all paid rent…yes yes you guessed it right, all this come from the depositors money. Lovely.

This is happening in CKP co-operative bank. The depositor can withdraw Rs. 1000 per month. The cashier gets an appraisal of Rs. 20,000 per month. Ironic is it not?

Cut to Punjab and Maharashtra Bank. 16L families impacted. Huge no? well to see the perspective CKP had 1.5L depositors. Depositors are like to get “Babbji ka Tullu”. Why is the media not keen to help CKP? Well let us be charitable – a) nobody told them b) their PR team was superb.

So what will happen in PMC?

One baboo(n) who cannot run any business will be appointed as an ADMINISTRATOR. He will get a salary -like all other employees, landlords, etc IN the year 2030 he will submit a report saying that no more recoveries can be made. Then sometime in 2035 the Depost corporation will pay your heirs (you will be dead by then)  a princely sum of Rs. 100,000 as a full and final settlement. Your next of kin will happily go out for dinner and use up this amount to pay the bill. Burp.

The following lessons are worth learning and repeating…

a) Cooperative banks are risky: stop asking stupid questions like “when should I remove the money”. Today,..NOW.

b) your money in the public sector looks to be safe BECAUSE every fm has a bail out budget. AJ paid Rs. 210,000 crs and NS has paid Rs. 70000 crs so far.

c ) Namo is capable of saying we will no longer bail out psu banks…if he estimates that the votes lost will not matter till the next elections. All the best.

d)if this post goes viral…your cooperative bank may not have enough money to pay ou.

e) remember Pmc will get paid AFTER all this tamasha….

What will the PmC deposit holders get?

Babbaji ka thulla…sorry for being blunt, but these are the facts.

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  1. Thanks for summing up the vibrant democracy called India.
    Governments, RBI governors, Presidents, CJI, etc come and go but Indian culture remains the same.

  2. How many people lost money in Kachra stocks in 2018 & 2019 due to poor governance. ADAG, Wadhawans, Yes Bank, India Bulls, ZEE, Jet, gvk power , adlabs, Manpasand, Vakrangee, Rain, anantraj,ashapuraminichem,hcl infosystem, leel,emkay global and kaya.

    Personally I had taken huge exposure to DHFL stock and kept it in my long term portfolio. Burnt very badly. I really wonder howmany long term equity investors too suffered in various stocks because the list is huge.

    The list is endless and don’t think these scams will ever stop be it co-op banks or kachra stocks.

  3. Doubt 1)
    The pledging shares by promoters gets reported .
    But modus operandi to get around this has been power of attorney to creditors.
    Is this a breach of rules or governance?

    Doubt 2)
    When the money gets diverted for purposes other than intended (as per resolutions, agreements) how far is it possible for auditors to raise red flag?

    Doubt 3)
    Action taken on an Auditor by SEBI has been reversed by Company Law . The said firm has coughed up substantial money in US because of listing of the ADR . Is this not contradictory ?

  4. @Narasimhamurthy. Questions are not very clear.. some thoughts are –
    1) If the PoA is created, for excising against some loan default, then loan will hit the B/s. In all cases, it will be in the board minutes & Qtly results, right? Then it is a question about repayment and solvency of the firm. PoA given to creditors for what purpose? was there any misuse? etc. For that matter the board is empowered to take any decision in co. affairs without including shareholders view. shareholders have to be vigil anyways.
    2) The authorities are now coming up with concept of forensic audit. There are many pairs of eyes watching company actions. Including sebi, tax authorities and central Govt through registrar of companies. Forensic audit responsibility does not end with what is shown in books and financials. In fact, it starts from where the conventional audit ends. Companies dare not put their reputation at stake for some crores here and there.
    3) Can you mention which section of Co law and what was the action? As long as ADR are raised within Indian legal framework and money is raised, sebi cannot do witch hunting/ harassing just because it may appear glaring. Yes, there are cases where auditor of Satyam was PwC (partner in crime) and this audit firm is still among the ‘big 4’. I dont know how the auditors involved came out of it clean. May be they wore raincoat.

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