Cosmos Bank → Lehman Brothers??

Cosmos Bank

For last two years, I have been highlighting the governance and accountability issues in a so-called ‘professionally managed’ century old Cosmos Co-operative Bank Limited that has unfortunately turned into a protected fief headed by only one person for decades. They often posture as some great institution that has played a critical role in our cooperative financial system. This bank is not subjected to any government oversight such as by Central Vigilance Commission, etc. Even though it is subjected to supervision of Reserve Bank of India, the supervision has been woefully superficial – a step short of being totally absent.

Window dressing of the NPAs has been rampant. The NPA ratio that is above 30% is well camouflaged below 11.00% so as to avoid attention of any Government agency, immediate dismissal of the existing Board and lodging of criminal cases.

The coterie headed by Dr. Mukund Abhyankar since 1990 is occupying the Board uninterrupted and has been running the Bank as their personal fiefdom without any change or challenge and piling up the fraud NPAs that have now touched monumental heights. The list published by me itself accounts for NPAs of Rs.2,917/- crore accounting for 27.1%. The average period within which the accounts have turned into NPA ranges from 4 months to 13 months. Add the NPAs of less than Rs. 1 crore and accounts that have been kept out of NPA category by deploying tactics such as fresh sanction etc., the figure is likely to touch Rs.4,000/- crore plus.

Cosmos Bank is competing with IDBI Bank, UCO Bank and Indian Overseas Bank with NPA of over 27%.

We now need the RBI or the Finance Ministry to step in and take some hard decisions.

This is a failed Bank and I may compare it with the systemic shock of its unraveling to the collapse of Lehman Brothers, exactly a decade ago. Lehman Brothers collapsed within a short period of getting good ratings. This local Co-operative Bank is not even subjected to any professional ratings at any point of time.  

Surgical action against the existing Board and its high ranking Management employees is the call of the day. Even though such ‘opacity’ has the ‘propensity to amplify panic’ and as Cosmos Bank goes radioactive, the depositors would be the only ones who are exposed to its toxicity.

Clearly, Cosmos Bank cannot remain in control of M/s. Kale-Abhyankar-Goyal’s crony club at this time – after all, they are fully complicit in having created the mess in the first place. Their complicity and direct involvement is emphatically underlined by their invoking of names like Sharad Pawar, Pranab Mukherjee and even Narendra Modi and his 2 PAs to silence me. Even though these leaders have no role in any fraud NPA, the conduct of the Board lead by Mukund Abhyankar conclusively proves its guilt.

As Cosmos Bank is in trouble, I have been hearing many stories about the lavish lifestyles and big-spending ways of Directors and several senior employees. This is yet another reason why the same management team should not be allowed to be at the helm of affairs of Cosmos Bank.

Since the bank is not in a position to liquidate the assets of the borrowers as either there are none or whatever they have are not fetching even 2% of the loan amount, the bank has been regularly selling off its own assets to raise the liquidity. This is well evident in its published accounts.

In recent meetings with Employees, the Board members told the staff that they would be paying the accumulated arrears of pay revision and bonus amounting to some Rs.70 crore by May 2019 out of bad debt reserves. This is another alarm bell. But the deaf-mute RBI and Finance Ministry would not hear it. The crystallized demand of Rs.60 crore raised by the Collector of Pune is still pending for payment and is another result of illegalities committed by the Bank.

If the existing team remains at the helm, we will continue to see more and more legal and financial hara kiri being committed in a desperate attempt to stay afloat.

The RBI and the Finance Ministry need to have a strong team in place to take charge of the Cosmos Bank and make an honest assessment of the situation. At stake is the interest of thousands of middle class Depositors.

I have already filed detailed dossiers with RBI, CBI and EOW.

If the collapse takes place, the blame would entirely lie at the doorsteps of RBI Governor Urjit Patel and Finance Minister Arun Jaitley.