From correspondents in Gujarat, India, 10:01 PM IST

The news of a crisis at Palanpur-based Gujarat Industrial Co-operative Bank Ltd (GICB) has created panic in the area as many account holders thronged the bank from Monday morning.

People started assembling at the bank premises following the suspension of payment above Rs.1,000. Even other banks in the Palanpur town, 150 km from here, refused to accept GICB cheques for collections.

'GICB has requested SBI (State Bank of India) to stop clearance of GICB cheques following its rising NPAs (non-performing assets) since last six months and accordingly we have intimated other banks not to collect the cheques for clearance,' SBI Palanpur branch manager S.T. Shah said.

'Restriction on the payment was intimated by the Reserve Bank of India (RBI) Sep 19 in view of rising non-performing assets of GICB since last six months that had adversely affected the profitability of the bank,' GICB manager V.K. Thakkar said.

He, however, added that the crisis was 'short-lived and will end within a couple of days'.

'Ours is a financially viable institution and we have sufficient funds to satisfy our 15,000 customers,' Thakkar said.

'As against Rs.60 million cash credit with the bank, a loan of Rs.40 million has been advanced that too against fixed deposits. As such there was nothing to be concerned,' Thakkar said.

According to Thakkar, talks between bank management and RBI officials were on in Mumbai and 'we are expecting a happy ending soon'.

(Staff Writer, © IANS)