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APUCB Case Analysis

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Introduction

Ahmedabad Peoples Urban Co-operative Bank (APUCB) which was formed in 1932, was

a leading cooperative bank serving financial needs of urban residents in India. Yet, the bank

made many governance errors and financial mistakes which finally resulted in its liquidation.

The problem started to appear when APUCB had accumulated large numbers of NPAs. Because

Hirak Biotech and Pentium Infotech did not pay back their loans on time, the bank’s financial

problems became greater. On top of everything, the bank suffered from poor leader behavior as

many officials participated in fraud and the misuse of company finances (Ahmedabad Peoples

Urban Co-operative Bank Case Study, 2025).

For this reason, APUCB experienced a large shortage of money, meaning it could not

satisfy its deposit holders which lowered people’s trust in the bank. To stop the bank from

accepting new deposits, the Reserve Bank of India took leadership and put restrictions on it.

Although the bank tried various ways to solve these issues, things got worse and an external

administrator was finally put in charge of managing the situation. Poor internal rules, not

handling credit risks well and weak governance led to the failure of the bank.

Relevance of the BCFSA Supervisory Framework

The BCFSA Supervisory Framework is a set of rules that helps find and solve risks found

in British Columbia’s pension plans (BMKP, 2025). Even though the framework is for pension

programs, it provides useful information for learning about the events that led to APUCB’s

failure. The main causes looked at in this framework were credit risk, operational risk, liquidity

risk and governance failures which caused the APUCB collapse. According to BCFSA, early

identification of risks and regular action by regulators help make financial institutions more
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stable, a fact that is relevant to APUCB (BCFSA, 2025). It concentrates on controlling risks by

applying proper governance and internal controls which APUCB did not achieve.

Both urban cooperative banks and credit unions overseen by BCFSA have the same

nature as cooperative financial institutions. Both types of institutions mainly work for local

communities and depend a lot on the trust of their members. Nevertheless, just as APUCB, they

can face problems associated with the management of credit, cash and governance. Since the

BCFSA framework is primarily about risk management and good oversight, using it makes it

simple to understand APUCB’s failures.

Understanding Key Risks and Controls

APUCB had difficulties due to problems related to credit, operations, governance and

liquidity. The biggest danger was credit risk, coming from the bank’s large investments in bad

loans. The case of two important borrowers, Hirak Biotech and Pentium Infotech, is notable

because they owed INR 14 crores (Ahmedabad Peoples Urban Co-operative Bank Case Study,

2025). Many of the bank’s loan problems were due to these bad loans which took up a lot of the

bank’s available funds. Since the bank could not handle the creditworthiness of borrowers nor

diminish the risks from unsecured loans, many loans became non-performing, reducing the

stability of the bank.

Also, APUCB dealt with not only credit risk, but also with operational risks. The bank

did not have enough controls in place, resulting in fraud by its senior staff and making the bank’s

problems even worse. Those who were busted were responsible for lending money without

carrying out proper checks, an outcome of these flaws. Such events highlighted that the bank
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lacked proper rules, transparency and control which greatly affected both its reputation and

finances.

There were also major governance risks to handle. APUCB’s board of directors did not

properly control and supervise the management of the bank. Even though the bank’s activities

were large and complicated, very little was done to hold it accountable. Because the board’s

decisions were weak and they lacked proper bank knowledge, important risks were not

controlled as they should have been. In addition, the bank failed mainly due to liquidity risk. As

the airline was unable to overcome its financial issues and faced more withdrawals of deposits

because people did not trust it, the importance of liquidity management was clearly revealed. The

lack of liquid cash in the bank stopped it from meeting demands by depositors which forced its

liquidation.

APUCB’s internal controls were unable to handle risks as effectively as they should have.

As stated by the BCFSA framework, it was necessary to have a firm system to examine loan

books regularly, check borrowers’ risk levels and avoid substantial loans with a high risk.

Because APUCB lacked proper checks and balanced with the board and its operation was

insufficient, the bank had to shut down. Not having enough liquidity plans or not using liquidity

management practices was another main oversight. Because of these issues, the bank’s financial

difficulties became even more serious.

Applying the BCFSA Supervisory Framework

With the BCFSA Supervisory Framework, it is possible to assess APUCB based on risks,

determine the nature of the issues and suggest solutions. Because of the BCFSA’s rules, risks are

evaluated by considering how likely they are and how much harm they can cause; thus, problems
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like credit, operational, governance and liquidity would have been considered most important.

The assessment method revealed APUCB had a swift surge of bad loans, poor measure of

liquidity and did not comply with reporting regulations. This information would have

encouraged the BCFSA to step in sooner to help limit the bank’s problems and stop it from

collapsing. APUCB would have faced careful evaluation concerning its credit risk policies since

non-performing assets (NPAs) were a top concern.

As a way of addressing this problem, BCFSA would recommend several strategies for

prevention and monitoring. Stress testing the bank’s liquidity and the creditworthiness of its

loans is one efficient method to use. APUCB could have caught any potential weaknesses and

dealt with them earlier if stress testing had been performed. Among other things, requiring the

bank to limit risky loans early on might have helped manage the bank’s credit risk better. A

different strategy could have been to force them into a merger with a bank that is financially

stable which would have given them the necessary funds and management support.

Evaluating Corporate Governance and Oversight

Problems in the governance of APUCB greatly contributed to the bank’s downfall. The

board did not follow its responsibilities by letting risk management fail and not closely watching

the bank’s daily activities. As noted by the BCFSA, an effective board should have had a bigger

role in supervising risk which means reviewing and approving major loans and evaluating the

finances of the bank. Not having knowledgeable members on the board and making poor

decisions increased the amount of risk for the bank.

Also, there was a lack of accountability and the right culture at APUCB. Like APUCB,

cooperative banks count on having a strong culture of compliance to earn the trust of their
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stakeholders and the wider public. Even so, the lack of a rules-abiding culture at APUCB made it

possible for the mismanagement of funds and fraud to happen. The main idea of the BCFSA

framework is that companies should have compliance programs, go through audits and hold

regular training for board members to ensure honesty and care. APUCB may have averted the

collapse of the company if it had rigorous independent supervision within its internal control

system.

Recommendations

In short term, APUCB should have carried out a full assessment of its loan portfolio and

acted to cut down risks from NPAs. The bank should have also strengthened how it approved

loans and only approved creditworthy people as borrowers. Speaking with regulatory authorities,

especially the RBI, might have equipped the bank with advice on dealing with lack of cash and

managing its system of governance.

In long term, APUCB needed to change its leadership structure in the future by adding

members who are experts in banking and finance. Regular training of directors and senior

management in governance would have enabled the board to make well-informed decisions and

watch over things effectively. Besides, if an improved internal audit system had been set up, it

would have made it easier to supervise risk management and promptly solve new issues. Greater

integration in reporting risk information could have allowed APUCB to detect threats sooner and

deal with them promptly.

Conclusion

APUCB’s downfall may be attributed to weak leadership, ineffective handling of risks

and not having enough liquid funds to cover its needs. If the framework had been followed,
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earlier intervention and stricter controls could have stopped or lowered the impact of APUCB’s

problems. Using the BCFSA, financial companies such as APUCB, understand important actions

they can take to bolster their resilience with proper governance, better risk control and full

compliance with regulations. Had the framework been used, the collapse of APUCB might have

been avoided or delayed which would have given cooperative banks important lessons to learn.
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References

Ahmedabad Peoples Urban Co-operative Bank Case Study (2025)

BCFSA. (2025). Regulatory Framework & Practices. Bcfsa.ca. https://www.bcfsa.ca/industry-

resources/pension-resources/regulatory-framework-practices

BMKP. (2025). BCFSA updates pension plan supervision framework to address emerging risks |

BMKP LLP | Pension, Benefit & Executive Compensation Law. Bmkplaw.com.

https://www.bmkplaw.com/what-we-think/news-and-updates/bcfsa-updates-pension-plan-

supervision-framework-to-address-emerging-risks.html#