Pune: The Pune Municipal Corporation's (PMC) proposed arrangement to deposit ₹500 crore in Cosmos Cooperative Bank and raise a loan of ₹450 crore against it for land acquisition for the High Capacity Mass Transit Route (HCMTR) project has drawn fresh criticism, with questions being raised over its financial viability, transparency and the selection of the bank. The civic administration has maintained that the arrangement would help it secure funds at comparatively lower interest rates, while a final decision is yet to be taken.
Pune Municipal Commissioner Naval Kishore Ram said the civic body was considering borrowing against the fixed deposit as banks were reluctant to finance land acquisition and those willing to provide loans were quoting higher interest rates.
"Banks do not easily provide loans for land acquisition. Very few banks offer such loans, and that too at high interest rates. PMC is not helping the bank; Cosmos Bank is helping us," Ram said.
Under the proposed arrangement, PMC would deposit ₹500 crore in Cosmos Cooperative Bank and avail an overdraft facility of up to 95% of the deposit, amounting to approximately ₹450 crore. The bank has offered an interest rate of 7.40% on the fixed deposit for 16 months, with quarterly payouts, while the overdraft would attract an interest rate of 7.70% per annum. However, the final borrowing rate is yet to be decided.
Standing Committee Chairman Shrinath Bhimale said the arrangement was being considered as Cosmos Bank was offering funds at a comparatively lower interest rate. He said the HCMTR project would require around ₹1,000 crore and the proposal was to raise funds against the deposit.
"We will discuss the matter with the municipal commissioner before taking a final decision," Bhimale said. He added that although the Standing Committee had approved the proposal, further discussions would be held and objections raised by elected members would also be considered.
Ram maintained that the arrangement would safeguard the civic body's deposit while allowing it to raise funds for land acquisition. He also said the interest earned on the deposit would be over 7%, in line with market rates, and that the fixed deposit would remain secure even if the bank encountered financial difficulties.
However, Congress corporator Arvind Shinde objected to the selection of a cooperative bank without inviting expressions of interest (EOI) from other lenders. He demanded that PMC invite competitive offers and select the bank offering the lowest interest rate.
Shinde also questioned the need for fresh borrowing when the civic body already has fixed deposits worth approximately ₹8,500 crore. Citing the availability of World Bank loans at around 0.1% interest, he questioned the financial rationale behind the proposed arrangement.
The controversy has also raised questions over the transparency of the decision, with opposition groups and Congress alleging possible political pressure behind the selection of the cooperative bank.
