HYDERABAD, Dec 16: Three cooperative banks in the state face the prospect of a run on their deposits thanks to a policy gap in the AP Cooperative Societies Act 1995. The first of these could be the Hyderabad based Prudential Cooperative Bank Ltd, which has come into the limelight following over a ruckus by its share holders on the absence of a deposit insurance cover and a valid licence from the Reserve Bank of India.

The other two are the Visakha Cooperative Bank and the Adoni Cooperative Bank which opted for conversion under the new cooperatives Act from the previous 1964 Act. The new Act was a sequel to the recommendations of the Brahm Prakash committee to provide more autonomy to cooperative socities in tune with the economic reforms and the AP government taking the initiative to implement these suggestions.

However, though the RBI guidelines make such a deposit cover mandatory for all banks, the AP Act under which the Prudential Cooperative Bank is registered does not stipulate so, which technically means that the Bank ceases to be a bank if the central bank's regulations are to be implemented strictly, RBI officials say.

The apex bank has clarified that it cannot award a licence to those cooperative banks registered under the new Act as it does not meet the stipulations of section 2 (gg) of the DICGC Act. So the organisations registered under the 1995 AP Act do not qualify as banks, RBI officials said.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.