The fall of Pratibha Mahila Sahakari Bank: A tale of power, mismanagement, and collapse

The Pratibha Mahila Sahakari Bank, established in 1973 in Jalgaon by Pratibha Patil, was intended as a beacon of hope for women's empowerment in the region. However, its promising start was overshadowed by mismanagement, allegations of nepotism, and financial irregularities. In 2003, the Reserve Bank of India (RBI) revoked its license, marking a grim end to what could have been a success story for cooperative banking in India.

Can a dream turn into a nightmare?

Once upon a time, in the dusty lanes of Jalgaon, Maharashtra, a dream took shape. It was 1973, and Pratibha Patil, an ambitious leader and future President of India, envisioned a cooperative bank run by women, for women. The idea was revolutionary—financial independence in an era when women’s empowerment was still a distant reality.

Fast forward to 2003, and the very institution that began with noble intentions lay in shambles. Accusations of cronyism, financial mismanagement, and blatant misuse of power led to its tragic demise.

What went wrong? This is a story not just about a bank but about the perils of unchecked power and the betrayal of trust.

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How did the bank fail?

The cracks began to show as early as 1995 when the Reserve Bank of India (RBI) declared the Pratibha Mahila Sahakari Bank "weak." By 2002, the situation had spiralled beyond repair.

Here is what the RBI’s report revealed:

• Minus Rs 197.67 lakh in capital: The bank’s liabilities far exceeded its assets.
• 65.8% loans went bad: Non-performing assets choked the bank’s financial health.
• No clear loan policy: Loans were granted arbitrarily, often to influential parties.

Also read: The Indian Taxpayers’ Silent Coup: How Citizens Destroyed Banks to serve Personal Interests

RBI revokes license, citing faulty practices

The Reserve Bank of India conducted a series of inspections that painted a dire picture of the bank’s financial health. Among the key findings were:

• Financial Erosion: The bank’s paid-up share capital and reserves were eroded to minus ₹197.67 lakh, with liabilities exceeding assets by a significant margin.
• Gross Non-Performing Assets (NPAs): NPAs made up 65.8% of total loans and advances, a stark indicator of mismanagement.
• Capital Deficiency: The bank failed to meet RBI's minimum share capital requirements, with the erosion ratio exceeding 312.4% of its net owned funds.
• Irregular Loan Disbursements: Loans were disbursed without proper security, often to family members of the bank's founder, further aggravating its fiscal woes.

It was not just numbers on a balance sheet; it was the life savings of ordinary depositors that vanished into thin air.

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Who was responsible?

All eyes turned to Pratibha Patil, the founder-chairperson. Though officially uninvolved since 1994, her influence over the bank lingered. Complaints alleged that loans were handed out like personal favours to her relatives.

• Rs 29.86 lakh waiver for her niece, Anjali Dilipsingh Patil.
• Rs 8.59 lakh waiver for her sister-in-law, Kavita Aravind Patil.
• Rs 2.47 lakh waiver for another sister-in-law, Rajkaur Dilipsingh Patil.

Such loans were often granted without securities, violating RBI norms.

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Nepotism and mismanagement in recruitment

The bank, which aimed to serve women in Jalgaon, failed to comply with government-mandated hiring policies. Instead of following SC/ST reservation norms, it recruited Patil's family members to key positions. Such practices raised concerns over transparency and governance.

Deflections from the founder's family

When questioned, Dilipsingh Patil, Pratibha Patil’s brother, admitted to taking loans from the bank but deflected blame, saying:

“How is it possible to say the bank went into losses just because Pratibhatai's family members took loans? The bank had 8,000 to 10,000 members.”

However, bank audits and the RBI’s inspection reports contradict this defense, highlighting how the loans to Patil's family disproportionately contributed to the financial erosion.

The role of the Sant Muktabai Cooperative Sugar Mill

Loans amounting to over Rs 40 lakh were granted to the Sant Muktabai Cooperative Sugar Mill, another institution linked to Pratibha Patil. These loans, secured against fixed deposits, matched the deposit value and were never encashed, further straining the bank’s fiscal position.

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What was the role of the RBI and government?

The RBI’s intervention began in 1995, but the bank failed to act on its warnings. By 2003, the RBI had had enough.

“Allowing the bank to continue would be detrimental to depositors,” the RBI’s report concluded, revoking its licence. In its 28-page revocation order, the RBI concluded: "Having regard to all the facts, the Reserve Bank of India is satisfied that allowing the bank to curry on banking business any further would be detrimental to the interest of the present and future depositors and hence the license granted to the Pratibha Mahila Sahakari Bank Ltd is hereby cancelled."

Show-Cause notice: A last-ditch effort

In February 2003, a month before the license was revoked, the bank received a show-cause notice highlighting major irregularities:

• Illegal Loans: Loans without proper sureties or securities, some exceeding the bank’s capital.
• Stock Market misuse: A telephone line used for stock trading racked up bills exceeding Rs 12 lakh, allegedly misused by Pratibha Patil’s brother, Dilipsingh Patil.

The bank failed to provide satisfactory responses, leading to the final revocation.

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Did the public suffer?

For the depositors, the bank’s closure was a personal tragedy. Families lost their life savings, and employees found themselves jobless overnight.

Voices of dissent: Employees and depositors speak out

The liquidation of the bank left 8,000-10,000 members, mostly women, in financial distress. Employees, too, bore the brunt of the closure, losing jobs and benefits. Vijay Kumar Kakade, a former president of the employees' union, lamented:

“Pratibha Patil was responsible for this... We want to tell our countrymen that such a person is going to occupy the highest office.”

One former employee lamented: “This wasn’t just a bank; it was our livelihood. We trusted it because of Pratibha Patil’s name. Now, we have lost everything.”

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Has the Cooperative Banking model in India failed?

The Pratibha Mahila Sahakari Bank was not an isolated case. Since 1947, India has seen over 300 cooperative banks shut down.

Why do some cooperative banks fail?

• Political interference.
• Poor governance and lack of accountability.
• Overreliance on localised funding.
• Voter apathy

Legacy of mismanagement

Despite claims of severing ties in 1994, documents show that Pratibha Patil was actively involved in the bank’s affairs until 2002, just before its liquidation. The case continues in the Bombay High Court, with allegations of nepotism, mismanagement, and fund misappropriation under investigation.

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Lessons from the collapse

The Pratibha Mahila Sahakari Bank's story underscores critical lessons for India’s cooperative banking sector:

1. Need for Regulatory Oversight: Strict enforcement of RBI guidelines is crucial to prevent misuse of cooperative banks.
2. Transparency in Governance: Family-run management models must be scrutinized to avoid conflicts of interest.
3. Empowering Members, Not Families: Cooperative banks must prioritize member welfare over personal gain.

If this scandal teaches us anything, it is the importance of transparency and accountability. Leaders must remember that with power comes responsibility.

The story of the Pratibha Mahila Sahakari Bank is not just about financial mismanagement; it is about the betrayal of trust. 

By highlighting these lessons, stakeholders can ensure that cooperative banks fulfill their mission of financial inclusion and empowerment.

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Author:

Tushar Mangl is an energy healer, vastu expert, and author passionate about creating a balanced, ethical society. Subscribe to his insights on finance, wellness, and life on his YouTube channel!

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FAQs

What is a cooperative bank?

Cooperative banks are member-owned financial institutions that operate on the principles of cooperation and mutual assistance. They cater primarily to rural and semi-urban communities and are regulated by both the Reserve Bank of India (RBI) and state governments.

How many cooperative banks have failed in India?

Since 1947, more than 300 cooperative banks have been shut down due to mismanagement, financial irregularities, and failure to adhere to RBI regulations.

Why was Pratibha Mahila Sahakari Bank closed?

The bank was closed due to severe financial mismanagement, granting unsecured loans to relatives of its founder, and non-compliance with RBI norms.

Was Pratibha Patil directly responsible for the bank’s collapse?

Though Pratibha Patil officially distanced herself from the bank in 1994, allegations suggest her influence persisted. Relatives reportedly received unsecured loans and waivers, contributing to the financial decline.

What are Non-Performing Assets (NPAs)?

NPAs are loans where borrowers fail to make scheduled payments for 90 days or more. High levels of NPAs, like those in this case (65.8%), are a red flag for any financial institution.

What lessons can be drawn from this scandal?

Key takeaways include the need for transparency in banking, strict adherence to regulatory frameworks, and minimising political interference in financial institutions.

Are there successful cooperative banks in India?

Yes, examples like Saraswat Cooperative Bank and Cosmos Cooperative Bank show that with robust governance and ethical practices, cooperative banks can thrive.

How does RBI regulate cooperative banks?

The RBI oversees cooperative banks through periodic inspections, issuing guidelines, and imposing penalties for non-compliance. State governments also play a role in governance.

Can depositors recover their money when a bank fails?

Depositors are insured under the Deposit Insurance and Credit Guarantee Corporation (DICGC) up to ₹5 lakh per account. However, delays in claims often lead to hardships for depositors.

Are family-run banking practices common?

Unfortunately, family-run banking monopolies are prevalent in cooperative banks, leading to conflicts of interest and financial mismanagement, as seen in this case.